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Record gold price dents demand for Swiss bullion in Gulf
Mon Oct 21 2024
Swiss gold exports to Saudi Arabia and the UAE have slumped in the past year, as its price rose by more than 30 percent driven by geopolitical challenges. Gold passed $2,700 per ounce on Friday for the first time ever. A year ago it was $1,980 per ounce, and a month ago $2,559.
While global exports fell by nearly 20 percent year on year in September, the drop was even more pronounced in the Gulf’s biggest markets. In the UAE gold imports from Switzerland dropped by 42 percent, while in Saudi Arabia they were down by 65 percent over the past year, data published by Reuters using figures from the Swiss customs agency showed.
Switzerland is the world’s biggest bullion refining and transit market. “Lower exports to Gulf states likely reflect high gold prices, which may be dampening investor appetite, coupled with regional central banks scaling back purchases as their surplus cash shrinks due to reduced energy revenues,” Ole Hansen, head of commodities strategy at Saxo Bank, told AGBI.
Saudi Arabia reported last month that it would post a fiscal deficit of SAR118 billion ($32 billion) in 2024, equal to almost 3 percent of GDP. Vijay Valecha, chief investment officer at Century Financial in the UAE, said the drop highlights a broader transformation across the Gulf region. “As regional economies grow and diversify, investors are increasingly turning away from traditional assets like gold, opting for investments that promise higher returns,” he said.
Core global source markets such as India and China also saw a large drop in appetite, but western markets such as the US and UK bucked the trend with imports up by, respectively, 1,041 and 620 percent year on year in September.
Hedge against inflation
Valecha said the western surge in demand was driven by a combination of economic uncertainty, inflation concerns and growing interest in gold-backed investments. “Investors turned to gold as a hedge against inflation, given its historical role as a safe-haven asset,” he said.
Andrew Naylor, head of Middle East and public policy at the World Gold Council, said investor interest in gold in western markets was a result of "significant" inflows into gold-backed exchange-traded funds, which he said served as an indicator of investor sentiment.
He said: "While high prices may have dampened demand for jewellery, investment demand is being driven by different factors. These include market momentum, concerns around global economic conditions, and the influence of rising interest rates, particularly in the US."
Source: https://www.agbi.com/