last week I read an article in Arabian Business magazine that called "For jewellers, gold loses its shine" which was very interesting. This is a summary of it and I also included my reflection about it...
In the Gulf traditional souqs, there are some habits that will never change throughout the years like bargaining, unlike the price of gold which change constantly. The price of gold rose up to $1,000 for the first time from one year and that happened because investors were looking to this kind of investment which is safe when the market isn’t stable.
Jewelers were upset because of several reasons; the first reason was the slow spending from customers in the time when the price of gold went up to 25% because of the high cost of gold. The second reason was due to the recession and it consequences on the tourists spending where we can notice a 50% fall in sales.
Since 2008, January had recorded massive fall in sales were it diminished by 70% as a result of the augment in prices and there was no festivals or events which boosted this fall. The demand continued to descend in the Middle East during the last three months of 2008. Moreover, performance of gold in the western market was under control in Hajj Season, while in the eastern market was feeble.
After the big crash in the world’s economy, investors recognized the fortune that gold still have which can be considered as the safest investment the investor could have. That enucleates the reason why do people keep purchasing gold even when the industry is not doing well. In addition, unpleasant reports regarding capital market will spread out in the time where gold is declining hoping them to retrieve soon. Market analysts anticipated that price of gold will not be stable in 2009.
The performance of dollar, economic enlargement and consumers require are some issues that have put the market under danger. One of the examples is India, which has been one of the biggest importing countries for gold and it have a huge consumption for gold, but since the crises occurred the demand and importing of gold had fall massively. In Dubai, gold dealers relieved because gold is still in the buying list of people.
As a finance student, I believe that people shouldn’t spend their money in risky investments like the real estate or buying stocks and bonds because the market condition is not stable at the moments. Purchasing gold will be my choice if I had to invest my money because it will keep it value even after years. From my studies and researches, I noticed that investors are always looking for the safest haven kinds of investment and that affects the prices of good. For instance, the increase in the price of any good (gold) will affect the demand of customers which will reduce.
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