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Arab News
3 days ago
- Business
- Arab News
Saudi gold demand defies price surge amid cultural, digital shift
RIYADH: Gold prices may be at record highs, but that has not stopped Saudi consumers from buying. In the first quarter of 2025, demand for gold jewelry in the Kingdom jumped 35 percent year on year, even as global demand fell 21 percent, according to the World Gold Council. That surge comes amid a global price rally, with gold breaching $3,500 per ounce in April, up from around $2,370 a year earlier — driven by geopolitical tensions, inflation fears, and aggressive central bank buying. 'This rapid increase in the price of the bullion can be attributed to one main reason – central bank buying,' Vijay Valecha, chief investment officer at Century Financial, told Arab News. Yet despite the soaring cost, Saudi Arabia's deep-rooted gold culture continues to shine, with consumers purchasing 11.5 tonnes of gold jewelry in the first quarter, up from 8.5 tonnes a year earlier. 'This feat occurred despite the 34 percent rise in prices in early 2025, demonstrating Saudi consumers' strong demand and purchasing power,' said Valecha. Gold in the Kingdom is more than a financial asset — it represents tradition, adornment, and intergenerational wealth. From bullion bars to minimalist 18-carat jewelry, Saudi buyers are proving resilient even as other regional markets, such as the UAE and Kuwait, witness sharp declines in demand. Hamza Dweik, head of trading for the MENA region at Saxo Bank, emphasized gold's cultural role, telling Arab News: 'Gold is deeply embedded in Saudi traditions, especially during weddings and festive occasions. This cultural attachment ensures a steady baseline of demand, even during price surges.' Global factors Valecha explained that following the conflict in Ukraine, many countries grew concerned about holding excessive reserves in US dollars, prompting nations such as China and Russia to increase their gold purchases. 'China has spearheaded record levels of global central bank purchases of gold. Hence, looking ahead, the trend of gold buying by central banks is expected to continue,' he added. Another push came in May, when Moody's downgraded the US credit rating from Aaa to Aa1, citing 'a sustained increase in government debt (exceeding $36 trillion), rising interest payment ratios, and persistent fiscal deficits exacerbated by political dysfunction and policy uncertainty.' Valecha added that this marked the first time the US lost its top-tier rating from all three major agencies. Cultural drivers In different parts of the Kingdom, people buy gold for different reasons. In the north, around 70 percent of buyers view gold primarily as an investment, while in the south, it is more closely tied to tradition and adornment. Gold bars and coins are also gaining popularity, with people stocking their safes with bars of varying weights and purity. In the first quarter, gold demand in Saudi Arabia grew 15 percent year on year to 4.4 tonnes. Jewelry preferences are also shifting — from favoring diamonds to a growing obsession with gold. More young buyers are opting for 18-carat pieces due to their affordability, modern style, and lighter tone, as they appear less yellow than 21- and 24-carat gold. 'They also have a less flashy design/colour, which makes them better for everyday use,' Valecha explained. Digital platforms and online gold purchases are also on the rise, blending tradition with technology — from buying fractional gold and using savings apps to investing through exchange-traded funds. 'Younger generations are blending tradition with technology — embracing digital gold platforms, fractional ownership, and ETFs, while still participating in cultural gifting. This is reshaping how gold is marketed and consumed,' Dweik added. While countries including the UAE and Kuwait have seen gold demand decline, Saudi Arabia is moving in the opposite direction, with domestic consumers leading the surge, supported by strong spending habits. Consumer spending in the Kingdom hit an all-time high in March, rising 17 percent to SR148 billion ($39.44 billion) — the highest monthly increase since May 2021 — before easing to SR113.9 billion in April. The shift in consumer behavior is evident across the Kingdom. Jewelers in Riyadh spoken to by Arab News reported a growing interest in custom pieces, lighter-weight ornaments, and contemporary designs that suit both festive occasions and everyday wear. The 18-carat trend, once seen as a budget-friendly option, has become a fashion choice, according to the jewelers. More women are purchasing gold for themselves, breaking away from the traditional gift-only narrative. While physical stores remain popular for high-value purchases, particularly during wedding seasons and religious festivals, digital platforms are making inroads. Online retailers like L'azurde are adapting to this demand by offering buy-now-pay-later plans, making gold more accessible to a wider audience. Popular jewelry items include 21-carat necklaces and rings, while younger buyers favor 18-carat pieces for daily wear. Market outlook Looking ahead, both Valecha and Dweik expect prices to remain strong. Valecha predicts gold could reach $3,700 per ounce by year-end, though he cautions short-term investors. 'Buyers should assess their investment horizon — long-term holders may still find value, while short-term buyers should be mindful of volatility,' he said. 'Sustained central bank purchases, heightened investor appetite in a period of uncertainty in the economic landscape, and projected interest rate cuts drive this bullish projection. The projected price under a recession scenario is as high as $3,880 per ounce,' Valecha added. Dweik agreed, and said: 'While structural drivers support continued growth, potential corrections could occur if inflation eases or interest rates rise.' Saudi Arabia may also be poised to grow into a regional gold trading hub. Valecha believes that with the right infrastructure and regulatory framework, the Kingdom could play a larger role in the global market. 'To elevate its status, a modern, transparent gold market ecosystem and enhanced refining capabilities would be essential,' he said. With deep-rooted traditions, rising investment activity, and a modernized retail environment, Saudi Arabia's gold market is not only resilient — it is evolving. In a time of global uncertainty, gold continues to shine across the Kingdom.
Khaleej Times
12-06-2025
- Business
- Khaleej Times
UAE: Gold prices jump nearly Dh5 per gram on Middle East tension
Gold prices jumped in Dubai at the opening of the markets on Thursday due to rising tensions in the Middle East and the weakening of the US dollar. On Thursday morning, 24K was trading at Dh406 per gram, rising nearly Dh5 per gram since last night's close. Similarly, 22K, 21K and 18K jumped to Dh376, Dh360.5 and Dh309 per gram, respectively. Spot gold was trading at $3,371.8 per ounce, up 1.4 per cent, as US President Donald Trump announced on Wednesday that US personnel were being moved out of the Middle East due to heightened security risks amid rising tensions with Iran. The US dollar index fell to a near two-month low, making greenback-priced metal more attractive to overseas buyers. Vijay Valecha, chief investment officer of Century Financial, said gold prices remained range-bound on Wednesday as risk markets await the outcome of the much-watched US-China trade talks. 'The consolidation of gold prices signals that broader uncertainty related to tariffs persists. In addition, a federal appeals court has permitted the continuation of the United States tariffs while it assesses a lower court's decision that the president overstepped his authority in their implementation. The World Bank has revised its 2025 global growth forecast down by 0.4 percentage points to 2.3 per cent, highlighting higher tariffs and increased risks as significant challenges for many economies,' he said. 'A break above $3,343 can indicate near-term bullishness and a move towards $3,371; otherwise, it can test the channel support at $3,323,' he added.
Arabian Business
10-06-2025
- Business
- Arabian Business
UAE economy bucks global trend as Europe, U.S. recession risks grow
The United Arab Emirates' economy is set to grow in 2025 due to its diversified economy and strong fiscal buffers, remaining largely insulated from global headwinds despite recession warnings for Western economies by JPMorgan, Moody's and Fitch. The Gulf nation's economic resilience contrasts with rising concerns of a mild recession in the United States and parts of Europe in the third or fourth quarter of 2025. Analysts cite non-oil sector performance, strategic investments and fiscal strength as key factors behind the divergence. 'The UAE's projected 4.5 per cent growth in 2025 stands in sharp contrast to a global outlook marked by mounting risks and downward revisions,' Osama Al Saifi, Managing Director for MENA at Traze, told Arabian Business. The country's economy grew by 3.8 per cent year-on-year in the first nine months of 2024, with non-oil GDP contributing about AED 987 billion, approximately 75 per cent of the total AED 1.322 trillion. The anticipated recovery in oil GDP, as OPEC+ cuts are gradually reversed, could offer an additional growth driver. During this period, the UAE saw significant growth across several sectors, Vijay Valecha, Chief Investment Officer at Century Financial, noted. 'The transport and storage sector led the way at 7.9 per cent growth due to a 20 per cent surge in airport passenger traffic. The construction and building sector expanded notably by 7.4 per cent, driven by significant urban infrastructure investments, while the financial and insurance sector grew by 6.8 per cent,' he said. UAE financial markets have demonstrated greater resilience than global peers during recent volatility. 'Out of 13 major indices analysed, only six have recovered from recent market drawdowns – with Dubai and Abu Dhabi indices taking about 38 and 28 days respectively to recover, ranking fifth and third in recovery speed,' Valecha added. In the first quarter of 2025, Valecha said, the Dubai Financial Market welcomed 19,366 new investors, with 86 per cent being foreign nationals. The market recorded its highest Average Daily Trading Value in over a decade at AED 663 million, marking a 67 per cent increase from the same period in 2024. Recession concerns easing but risks remain The International Monetary Fund projects global trade growth to slow to 1.7 per cent this year, presenting a significant test to Gulf economies. With growth in the Gulf Cooperation Council expected to moderate to around 3 per cent, down from earlier projections, external risks remain substantial. JPMorgan recently revised its U.S. recession probability from 60 per cent to 40 per cent following a temporary pause in U.S.-China tariff actions. U.S. growth is projected to decrease to 1.8 per cent in 2025, one percentage point lower than in 2024. 'The likelihood of a global recession in 2025 remains elevated due to escalating trade frictions and protracted monetary tightening,' Al Saifi said. 'In this regard, economies strongly exposed to the U.S., such as Canada and Mexico, could see possible contractions.' For the Gulf region, recessionary pressures would most likely be transmitted through a downturn in global demand and subsequent strain on oil prices. 'A recession in the U.S. or Europe would likely exert downward pressure on global oil demand and weigh on fiscal performance,' Al Saifi explained. Nevertheless, Gulf economies appear better positioned than in previous cycles. 'Substantial sovereign wealth assets, contained inflation, and firm domestic demand provide a degree of protection,' Al Saifi added. 'Given the region's currency pegs to the U.S. dollar, any interest rate reductions by the Federal Reserve would translate into more accommodative financial conditions.' Hamza Dweik, Head of Trading at Saxo Bank MENA, noted that the UAE's 'strong macroeconomic fundamentals, active IPO pipeline, and diversified revenue streams position it as a 'relative safe haven in the global landscape.' Inflation in the UAE is expected to remain at approximately 2 per cent throughout 2025, despite upward pressure from global tariffs. 'Consumer spending is expected to expand 4.3 per cent, supported by steady economic growth and a likely easing of interest rates,' Al Saifi said. This contrasts sharply with persistent inflation challenges in Western economies. Sectors show varying vulnerability Not all sectors in the UAE economy are equally protected from global headwinds, experts say. 'Oil and gas, despite aggressive diversification measures, still contributes about 25 per cent of the UAE's GDP,' Valecha said. 'In times of recession, global oil demand could fall drastically, impacting many UAE-based energy firms through falling oil prices.' Tourism and hospitality could see reduced vacation spending despite Dubai attracting 18.72 million international visitors in 2024, marking a 9.2 per cent year-on-year increase. 'This could mean that airlines like Emirates and Etihad, along with major hotel chains, may experience a decline in revenues,' he added. The real estate sector, which relies on foreign investment and capital flows, could also face challenges. Valecha added that major property developers could potentially witness slower sales and declining property prices and construction projects may face delays or cancellations in extreme cases, especially if tied to foreign investments. Dweik identified specific vulnerable areas: 'Logistics, real estate – particularly off-plan investment-driven projects – and non-oil exports like aluminum and petrochemicals are most vulnerable to a potential U.S. recession.' More resilient sectors include consumer staples, healthcare and utilities. 'A defensive sector like healthcare may remain well supported by inelastic demand for medicines and healthcare products, regardless of overall economic conditions,' Valecha explained. 'Companies like Dubai Electricity and Water Authority and Abu Dhabi National Energy Company, backed by the state, would be insulated from market volatility.' Trump visit strengthens economic outlook The UAE's economic prospects received a significant boost from recent agreements with the United States following President Donald Trump's May visit. Commercial agreements exceeding $200 billion were signed, with a broader investment commitment of $1.4 trillion over the next decade. Bilateral trade talks focused on artificial intelligence, advanced technologies, and semiconductors, culminating in the launch of the US-UAE AI Acceleration Partnership. The UAE secured a deal to import 500,000 Nvidia H100 chips annually and will develop a 5-gigawatt AI data centre in Abu Dhabi – set to be the largest outside the US. In the energy sector, the UAE pledged to increase investments in U.S. energy projects from $70 billion to $440 billion by 2035. This includes a $25 billion partnership between UAE sovereign wealth fund ADQ and U.S. firm Energy Capital Partners, and a $60 billion partnership with ExxonMobil, Occidental Petroleum, and EOG Resources. The manufacturing sector will see Emirates Global Aluminum invest $4 billion in a new primary aluminum smelter in Oklahoma – the first of its kind in the U.S. in 45 years. A Gallium project with RTX and the UAE's Tawazun Council aims to secure U.S. semiconductor and defence supply chains. 'Trump's visit yielded substantial outcomes in artificial intelligence, energy, aviation, manufacturing, and critical minerals,' Valecha said. 'President Trump's imposition of a 10 per cent baseline tariff on UAE imports – lower than those faced by many other nations – had only a marginal impact.' Investment patterns and opportunities The global economic environment has prompted significant shifts in investment behaviour. 'We are observing a similar trend among MENA investors, who are increasingly diversifying away from U.S.-centric portfolios,' Dweik said. 'While the U.S. remains a key market, recent volatility and policy uncertainty have prompted a tilt toward European and emerging market assets.' Valecha cited analyst expectations of significant fiscal stimulus worth €500 billion over the next 12 years following recent German elections. 'This fiscal stimulus would focus on infrastructure spending in Germany, the largest economy in the Eurozone, accounting for about one-fourth of the region's GDP,' he explained. UAE stock markets currently offer value opportunities, according to Valecha, with Dubai's main stock index trading about 16.5 per cent below its five-year average valuation. The Abu Dhabi Securities Exchange index shows a similar discount of about 16.3 per cent from its five-year average. Liquidity conditions in UAE markets have strengthened significantly. 'In Q1 2025, DFM recorded its highest Average Daily Trading Value in over a decade at AED 663 million, marking a 67 per cent increase from AED 398 million in Q1 2024,' Valecha noted. For regional investors navigating this environment, experts recommend diversification. 'Investors should consider blending traditional and alternative assets, such as sukuk, infrastructure, and private equity, while allocating capital across resilient sectors like healthcare, technology, and tourism,' Dweik said. Looking ahead, the IMF forecasts that the UAE's GDP will increase by 4 per cent in 2025 and by 5 per cent in 2026, making it the fastest-growing economy among Gulf Cooperation Council nations. The UAE economy is projected to surpass the overall growth rate of oil-exporting nations, which are expected to grow by 2.6 per cent in 2025 and 3.1 per cent in 2026.
Khaleej Times
29-05-2025
- Business
- Khaleej Times
Gold prices in UAE: Is Dh400 per gram the new normal?
For UAE residents considering gold for long-term investment or savings, now may be the right time to act. According to analysts and industry insiders, the precious metal is expected to remain above Dh400 per gram in the medium to long term. This marks a significant shift in market dynamics. In April, 24-carat gold crossed the Dh400-per-gram threshold for the first time in Dubai. This surge was driven by a mix of global uncertainties, including former US President Donald Trump's tariff policies, geopolitical tensions, falling interest rates, and strong demand from central banks. As of Wednesday evening, 24-carat gold was trading at Dh400.25 per gram, while 22-carat gold was priced at Dh370.75. On the global stage, spot gold hovered around $3,306 per ounce, a modest increase of 0.13 per cent. 'Volatility is likely to persist in the short term, primarily influenced by the pace and outcomes of ongoing trade negotiations,' said Vijay Valecha, Chief Investment Officer at Century Financial. 'Any major development — be it a breakthrough deal or new tariffs — could trigger sharp market reactions.' Valecha noted that although short-term fluctuations are expected, gold prices are likely to remain above Dh400 per gram over the long term. 'Trump's unpredictable tariff strategies have contributed to global trade uncertainty, increasing demand for safe-haven assets like gold. Recently, he threatened a 25 per cent tariff on all iPhones manufactured outside the US and a 50 per cent levy on EU goods — though these were temporarily postponed as trade negotiations continue.' Even if new trade agreements are reached and tariffs are lowered, Valecha believes gold will maintain its appeal due to broader economic concerns. He forecasts that gold could rise to $3,700 by the end of the year and potentially reach $4,000 by mid-2026, up from the current $3,335 per ounce. 'America's widening trade deficit, the sharp increase in the US debt-to-GDP ratio from 35 per cent in 2007 to an expected 100 per cent by 2025, and the fiscal impact of Trump's tax cuts have all contributed to a global flight to safety,' he added. 'These factors strengthen gold's position as both a portfolio diversifier and stabiliser.' Valecha cautioned that while significant trade deals could cause a temporary dip in gold prices, the broader macroeconomic fundamentals support a continued rally. Aditya Singh, Head of International Jewellery Business at Titan Company, echoed these sentiments. 'Although today's elevated gold prices may seem unusual, they align with historical trends where prices rise during periods of economic uncertainty,' he said. He advised retail buyers not to panic but to monitor key global indicators such as interest rates, inflation, geopolitical tensions, and central bank reserves. 'Small, consistent purchases tend to yield strong returns over time. We encourage customers to view gold as a blend of emotional and financial value — whether for weddings, milestones, or as a store of wealth, informed decision-making is essential.' Ramesh Kalyanaraman, Executive Director at Kalyan Jewellers, emphasised the enduring value of jewellery as a long-term asset. 'While natural price fluctuations will occur, steady demand in culturally rich markets like the UAE reassures us that gold will continue to be a preferred choice,' he said.
Zawya
28-05-2025
- Business
- Zawya
Valuation concerns, profit booking weigh on United Carton's debut trade on Tadawul
Shares of Saudi Arabia's United Carton Industries Company (UCIC) closed flat on Tuesday's trading debut, with tariff threats, along with profit booking and overstretched valuations turning away investors, according to analysts. Despite being nine times oversubscribed and raising proceeds to the tune of 600 million Saudi Arabian riyals ($160 million), the stock closed lower by 1.5% at 49.25 riyals per share, as against its offer price of 50 riyals. The mixed performance was also visible on Wednesday with the stock dropping to lows of SAR 46.60 in early trade, with the last trade settling at SAR 46.85 by 2.30pm local time. Vijay Valecha, Chief Investment Officer, at UAE brokerage Century Financial said that even though the stock opened 6% higher at 53 riyals apiece and had rallied as much as 9% later during the day, 'signalling strong investor interest and participation in the IPO,' the stock's overall performance was a result of a confluence of factors, 'chief among them being concerns around valuation.' 'With a market capitalisation of approximately SAR 2 billion and operating earnings of SAR 124.7 million in 2024, the company is trading at a price-to-earnings multiple of 16.16x — notably above the Asia Pacific (developed) industry median of 13.53x. This premium may have tempered investor appetite at the time of listing,' Valecha explained. He continued: 'Additionally, the stock may have closed lower after a round of profit-booking, as some IPO participants were likely short-term traders aiming to capitalise on immediate listing gains rather than holding for long-term value. Lastly, although the company has limited direct exposure to [US President Donald] Trump's tariffs, its industry could face some indirect pressures in the form of elevated input costs and softer demand from international customers impacted by tariffs.' Profit booking UCIC shares opened at SAR 53 and hit a high of SAR 54.5 within the first five minutes of trading before finally closing at a low of SAR 50.5 on day one. Trading volume exceeded 17 million shares, representing approximately 1.5 times the 12 million secondary shares offered. 'It must be noted that the volume in the first five minutes was at 1.68 million shares. For comparison, the IPO was for about 12 million or 30% of the company's total issued share capital, meaning that about 14% of the company's floating shares were traded within the first five minutes alone. Given this, there was an immense profit booking after the price hit the high mark of SAR 54,' Valecha said. Added pressures emerged from the 'slightly stretched valuations,' he added. 'UCIC is a corrugated company in the Developed Asia Pacific region. The median P/E ratio of the listed companies operating in the containers and packaging segment is approximately 13.5. Meanwhile, the P/E ratio for UCIC is approximately 16.2 (market cap of SAR 2.016 billion / net income from operations of SAR 124.7 million). This implies that UCIC is slightly overvalued in comparison to its peers.' Flynas, SMC IPO Following the UCIC debut, all eyes are on the Saudi Flynas IPO, with Specialized Medical Company (SMC) close behind. 'The market could find support as it continues to see strong interest in Saudi IPOs, including the upcoming Flynas listing. Successful IPOs could help attract local and international capital to the stock market, which could help stabilise prices,' Valecha said. 'The SAR 4.1 billion IPO of Flynas, which opened today for retail participation, while being about 100 times subscribed by institutions, indicates massive investor demand,' said Valecha. 'On the other hand, Specialized Medical Company (SMC) extended its book-building period to allow qualified investors to review their bids, while postponing the retail offering period to June 15.' SMC has though confirmed its commitment to the IPO, stating the listing remains on track, and the business fundamentals and long-term growth strategy remain unchanged. One deal still awaiting an intention to float is Ejada Systems, with its Capital Market Authority approval expiring on June 23. (Writing by Bindu Rai, editing by Seban Scaria)
