The regional office of the World Gold Council in Dubai has announced that despite the 17% hike in gold price, the first quarter of 2007 witnessed an increase in gold sales in the UAE as figures reached US$0.73bn contributing to a 23% rise from US$0.60bn in the same period of 2006.

Gold consumption (jewellery and investment) in terms of tonnage in the UAE experienced a 6% increase in the first quarter of 2007 compared to the same period of 2006. Gold consumption in terms of tonnage in the UAE was 28.1 in the first quarter of 2006 and rose to 29.7 in the first quarter of 2007.

The first quarter of 2007 started well with excellent off take from the highly successful Dubai Shopping Festival running from December 20, 2006 to February 2, 2007. The festival witnessed record sales by participating jewellers that were 25% higher than the successful festival held two years back.

Last year's collapse in the stock market has reduced the attractiveness of shares while the real estate boom is showing signs of slowing down. Both these developments have freed consumer income for items such as gold and have encouraged merchants, including those owning gold businesses, to channel investment towards developing their traditional activities.

Consumers are also now accustomed to high gold prices and a growing consensus that the price of gold could rise further. The small retreats in the gold prices from time to time were seen as a strong buying opportunity.

"The positive effect of the marketing and promotional campaigns held by the World Gold Council and its partners from gold traders in several countries of the region have been very much apparent on gold jewellery demand," said Moaz Barakat, MD of the Middle East, Turkey and Pakistan World Gold Council, commenting on the Q1 2007 results.

"It is worth mentioning, too, that consumers continued to buy gold jewellery of lower weights and paying higher prices because of their belief in the importance of gold and gold jewellery in their lives. Such conviction is backed by the increasing interest in gold from long-term investors regionally and worldwide, who have added gold to their investment portfolios in aiming at balanced diversification and returns. Moreover, gold jewellery sales are expected to increase in the second quarter of the current year."