UAE Imports Dive 42%
Swiss gold exports to Saudi Arabia and the UAE have plummeted over the past year, primarily driven by a significant price increase exceeding 30% amid ongoing geopolitical tensions. On Friday, gold prices soared past $2,700 per ounce for the first time, compared to $1,980 per ounce just a year ago and $2,559 a month ago.
Recent data from the Swiss customs agency, as reported by Reuters, highlights that while global gold exports declined by nearly 20% year on year in September, the downturn in the Gulf region was even more severe. Specifically, gold imports from Switzerland to the UAE dropped by 42%, and in Saudi Arabia, the decrease was a staggering 65%.
Switzerland stands as the world’s largest bullion refining and transit hub. According to Ole Hansen, head of commodities strategy at Saxo Bank, the reduction in exports to Gulf states is largely attributable to soaring gold prices, which are suppressing investor demand. He added that regional central banks are also scaling back their gold purchases due to a decrease in surplus cash, stemming from lower energy revenues.
Saudi Fiscal Challenges
Saudi Arabia recently reported a projected fiscal deficit of SAR118 billion ($32 billion) for 2024, equating to nearly 3% of its GDP. Vijay Valecha, chief investment officer at Century Financial in the UAE, emphasized that this decline signifies a broader shift across the Gulf region, where economic diversification is prompting investors to move away from traditional assets like gold in favor of investments with potentially higher returns.
Global Trends and Western Demand
The demand for gold is not uniform globally. While core markets such as India and China have experienced significant declines in appetite for gold, Western markets like the US and the UK have seen a remarkable increase in imports—up by 1,041% and 620%, respectively, year on year in September.
Valecha pointed out that this surge in Western demand is driven by economic uncertainty, inflation concerns, and a growing interest in gold-backed investments. He noted that investors are increasingly turning to gold as a hedge against inflation, given its historical status as a safe haven.
Andrew Naylor, head of Middle East and public policy at the World Gold Council, echoed these sentiments, attributing rising interest in gold in Western markets to significant inflows into gold-backed exchange-traded funds (ETFs), which indicate a shift in investor sentiment. He remarked that while elevated prices may dampen demand for jewelry, investment interest remains strong, fueled by various factors, including market momentum, global economic concerns, and the impact of rising interest rates, particularly in the United States.
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