Gold sales volume dropped 19 per cent in the UAE in Q1 2008 compared to the same period last year, even as the value of sales increased 15 per cent, a report said.

 The sales totalled Dh3.1 billion in Q1 2008 compared to Dh2.7 billion in Q1 2007, World Gold Council's regional office in Dubai announced.

Gold sales value increased 7 per cent in Saudi Arabia. Egypt witnessed an astounding sales increase of 64 per cent, said the council.

The sharp rise in the gold price, which briefly touched record levels above $1,000/oz in mid-March, was a key determinant of movements in gold demand in the first quarter.

It resulted in the total demand falling from 86.3 tonnes in Q1 2007 to 70.6 tonnes in Q1 2008 in the UAE, Saudi Arabia, other Gulf states and Egypt.

The fall was 25 per cent in Saudi Arabia and 30 per cent in other Gulf countries, it said.

There was a notable exception in Egypt, where gold demand increased 15 per cent to reach a total of 18.0 tonnes in Q1 of 2008.

The rise in the gold price provoked a surge of both jewellery and investment buying in Egypt due to the widespread belief that the price was going to rise further.

The surge in gold price affected markets worldwide. India for example, which is the largest market for gold and also the most price sensitive, continued to suffer from the impact of high and volatile prices as gold demand dropped by almost half the levels of Q1 of 2007, the council said.

Commenting on the Middle East market performance, Moaz Barakat, managing director of the World Gold Council in the Middle East, Turkey and Pakistan, said: "Despite the shortfall in tonnage in the recent months, gold's safe haven and hedging characteristics have been a major attraction to investors during this period of instability, greater inflationary fears and falling dollar.

In the UAE the increase in the investment sector was from 1.9 tonnes to 2.3 tonnes in Q1 of this year compared to the previous year contributing to a 22 per cent increase.

“We also believe that investor interest will remain very strong in the near future and that as the price stabilises, major gold jewellery buying consumers will adapt to a higher floor in the price," he said.

Early indications are that demand in Q2 will be more buoyant than in the first quarter. It also appears that demand for 22-carat gold during the Akshaya Thritiya festival was higher than last year. -TradeArabia News Service