Bahrain's jewellery manufacturers are facing a crisis with rising gold prices forcing down demand for the precious metal.

The news emerged as hundreds of local and foreign exhibitors showcased their goods at the ongoing Jewellery Arabia exhibition.

The industry is still reeling from the increase in international gold prices, which have almost doubled in the last two to three years, says a leading Bahraini businessman.

It has mainly affected the small-and-medium gold and jewellery businesses with some struggling to meet their running costs, Bahrain Chamber of Commerce and Industry (BCCI) pearl, gold, jewellery committee board member Mohammed Sajid told our sister newspaper Gulf Daily News (GDN).

'In the local market, prices have had a big impact on the industry, 50 per cent of manufacturing units have been affected badly.

'In Manama, there are about 100 shops and 70-80 per cent don't have buyers because international customers are not approaching because of the prices.

'The small-and-medium enterprises are the most in trouble because they might have only 20 workers but they still have to pay their rents, residential fees, Labour Market Regulatory Authority fees, General Organisation of Social Insurance and they may sit for months without making a profit.

'In Bahrain, there are three to four big players, but the small-and-medium goldsmiths are more than 200, the majority are struggling because the demand for gold is not like it was before the recession.'

The Al Jabriya Group managing director explained that gold prices two to three years ago were around $700 (BD264.6) per ounce, but now they are about $1,380 (BD521.6) for the same weight.

Sajid said the price increase was largely a result of the economic crisis and investors turning to gold as they look for a more stable asset.

But the recession in the property market had also affected the sector because it reduced buyers' spending power, he said.

'I'm expecting the price could even cross $1,500 but if it does there is a possibility it may rise to $1,800 or $2,000,' added Sajid.

'Some say the price will go back to $700 but this is a dream and will never happen because countries like China and India have invested $1,200 per ounce won't sell at $700, so I think if there is any normality in the price it will stay not less than $1,000.'

Sajid said in the Gulf region about 25 per cent of staff had lost their jobs from major jewellery workshops as a result of the crisis.

However, Bahrain was not suffering as badly compared to some other countries such as Kuwait, where many goldsmiths were turning to silver to make a profit.

'Fifty per cent of the Kuwait jewellery market that previously sold gold has now converted to silver,' said Sajid.

'They have been affected very badly and decided they can't buy gold now.

'Bahrain is not turning into this trend, but we have found that silver is doing much better than gold.'

Sajid said although Bahrain's gold and jewellery sector had been badly hit by the crisis and the gold price increase, it still had customers due to its reputation.

Speaking on the sidelines of Jewellery Arabia, at the Bahrain International Exhibition and Convention Centre, he said Bahrain was still the top market in the region for its gold and jewellery craftsmanship.

The biggest buyer of jewellery ornaments for Bahrain is the Saudi Arabia market, as well as countries such as Yemen, Sudan and Libya.

'Bahrain's jewellery is in demand because people feel they are getting good value for money because of the high level of expertise,' said Sajid.

However, Sajid warned the sector was in trouble and many problems needed to be addressed.

He said the sector required to be better organised and given special attention, especially during the financial crisis.

'They need some kind of funding or something that will help this special sector preserve its name and history.'-TradeArabia News Service