Despite the bustling gold souks, dry statistics show that the people and the governments of the Gulf have shunned gold in recent years. By failing to place more of their reserves in the precious metal they have missed out on one of the best investment opportunities in recent times.
Maher Marzouk, a senior executive at the Kuwait-based Noor CM trading house, has been explaining the benefits of gold to his clients for several years. He shows an al-Seyassah article from 2010 in which he went on the record to accurately forecast the coming rise in gold prices, and where he advised readers to diversify into commodities, specifically gold.
Those clients who took his advice are now much richer for it. Even in a diversified portfolio that held gold as a smaller part of its investment mix, gold’s shining performance would have more than offset the pounding that investors took in the stock markets.
Unfortunately, Marzouk says that there were not enough who listened; Both individuals and governments have turned a blind eye to the metals trade, and have missed out on the remarkable rise of gold.
Noor CM was not alone in calling out the merits of holding gold– the International Monetary Fund in 2008 also advised Arab Gulf governments to put more of their reserves into the precious metal, but to no avail.
The World Gold Council reports that while countries like the USA, Germany or Italy maintain over 70% of their national reserves in gold, Middle Eastern countries have very low levels of gold reserves. Saudi Arabia only has 3.3% of its national reserves in gold, Syria has 5.9%, Morocco keeps 4.6%, Yemen has 1.3% and Oman has no gold reserves at all. Kuwait at 13.2% and Egypt at 12.7% are in a slightly better position, but the regional leader is Lebanon, which currently has 29.6% of its reserves in gold. Its 286.8 tonnes of the precious metal have yielded the nation a substantial windfall over the past year.
Reports from the World Gold Council’s investment research program also show that in the Middle East consumer purchases of gold – mainly as jewelry - are still falling. Demand in Saudi Arabia fell by 16% during the first two quarters of the year compared to the first half of the previous year. Demand from the other Gulf countries fell 4%. The UAE shored up regional demand, dropping just 1%, but most of its gold jewelry demand was generated by Indian expatriates who transfer their gold holdings outside the country. In comparison, global demand grew 6% during this period.
Purchase of gold for investment was also limited, with the entire Middle East region buying just 6.8 tonnes of the precious metal. The trend direction here was slightly promising, however, as the small purchase nevertheless represented a year-on-year rise of 11%. Most of the increase was generated by a surge in Saudi demand, which grew 26% in the first two quarters – perhaps the experts’ advice is being taken to heart after all. (Source: www.nuqudy.com)
