Bahrain: Gold traders in Bahrain have blamed Brexit for taking the shine off the precious metal, as prices surge and demand plunges, according to a leading businessman.
Britain’s shock vote to leave the European Union (EU) has seen investors pulling out of the weak pound sterling and buying gold bullion while others hold on to their stocks because of sharp market fluctuations.
Gold prices soared by as much as 8 percent to its highest level in more than two years on Friday when Britons voted in a referendum to quit the EU.
Traders in Bahrain are now feeling the heat because of the high prices, said GCC Gold and Jewellery Association chairman Mohammed Sajid.
“Last week the price of 24-karat gold was BD13 per gram; it was BD16.9 yesterday, thanks to Brexit,” he told the GDN.
Investors were scurrying for protection in gold bullion, he said.
“Gold is traditionally looked at as a safe haven investment and after Brexit many people are using the weak pound sterling to buy [gold]bullion. This has led to a further increase in gold prices globally.”
Sajid said gold traders in Bahrain, especially small and medium businesses, were badly affected as they are getting fewer orders.
“The market is fluctuating big time after Brexit and the demand is low right now.
“We were expecting to do good retail business during Ramadan and Eid but that will not happen now because of the high prices. Besides, customers are not spending much.”
The biggest blow for GCC traders this year has been the 25 percent drop in the wholesale jewellery market in Saudi Arabia, Sajid pointed out.
“Some traders are holding on to stocks, waiting for the gold prices to come down, which will not happen anytime soon as I expect the prices to further go up this year.”
He said a similar trend was witnessed during the global financial crisis when gold prices touched $1,900 a troy ounce adding that yesterday’s rate was around $1,333 a troy ounce.
“The feedback we have received from Saudi gold traders, mainly in Jeddah, is that business is slow despite the presence of millions of Umrah pilgrims there during this time of year.
“It is an alarming situation for us because if the Saudi gold market is slow it has a direct effect on us as they are our major clients.”
The businessman said Bahrain’s gold market has always enjoyed a good reputation regionally.
“Once, our major customers were from Libya, Iraq and Yemen, but the political situation
in those countries has affected gold trading activity.
“To make things more difficult the overhead costs of running operations in Bahrain for around 500 gold traders has gone up which is affecting the sector.
“The only solution for us is to create new markets in Asian countries by promoting Bahrain’s gold sector at international exhibitions and events.
“The sales are down and this trend will continue.”
“We need support from the authorities to boost the sector especially post-Brexit.”
Gold dealers in London reported a surge in demand for coins and bars from retail investors last week while world stocks headed for one of the biggest slumps on record of about $2 trillion to a 31-year-low.