With a 10 gram gold coin costing over SR1,450, against just over SR1,150 only a few months ago in Jeddah’s gold markets, people chose to spend on food and other necessities instead.
“Ramadan is all about food and not about buying jewelry,” said Abdul Rahman Mahfouz, a local executive at a construction firm.
“There has been a steep increase in the price of gold in the past three months. This has affected our business and sales are down by as much as 25 percent,” said Abdullah Kindi, a jewelry retailer in downtown Balad.
“People have been shying away from buying gold and jewelry because of the skyrocketing prices and that too at a time when the world is yet to recover from one of its worst economic slowdowns.”
Most retailers said they looked forward to the month of Ramadan and Eid Al-Fitr and had been stocking up on gold and jewelry, as the period often recorded maximum sales.
“We were, however, skeptical this time as the market was volatile with prices reaching all-time records and sales dropping by 25 to 30 percent throughout the year,” Kindi added.
“In fact, the prices of jewelry have risen by up to 50 percent, which has affected our business.”
A retailer at Kandara Gold Souk said sales had increased, but not by as much as sellers had expected.
“Of course, there were local families visiting us, but they did not boost our sales much. The record turnout of Umrah pilgrims contributed a little to our sales of gold and jewelry, but not to satisfactory levels,” he added.
Over the years, pilgrims have shown their inclination to purchase gold and jewelry as gifts for their relatives. This year too, Umrah pilgrims were seen visiting the gold souks.
“Our country sits on gold mines, but I cannot resist the temptation of purchasing jewelry from here for gifting them to my family and relatives back home,” Ibrahim Oosman, a South African pilgrim from Cape Town, said while shopping at Kandara Gold Souk.
Although there are no official monthly reports on gold sales here, reports from traders and retailers indicate a drop of around 15 percent between August and September over the same period last year.
Retailers said they have kept their fingers crossed for the post-Eid period.
“I believe prices will increase further in keeping with the ongoing trend,” one of them said. “Our sales are already falling. What will happen in the coming months is anybody’s guess.”
Gold jewelers are now pinning their hopes on the upcoming wedding season, Eid Al-Adha and other celebrations.
“We expect some improvement in sales in the last three months of 2010,” one retailer said.
With record gold prices, retailers are also focusing on diamond jewelry where profit margins are higher than gold, he added.
The World Gold Council says it has been developing goods tailored to the region’s consumers so that people will be encouraged to buy jewelry based on design rather than as a commodity.