Dubai's shopping festival is expected to help boost gold jewellery sales in the Gulf emirate, but a new surge in prices may dampen demand, jewellers and officials said on Sunday.

Visitors to the Jan. 24-Feb. 24 promotional festival from energy-rich states such as Saudi Arabia are flocking to Dubai's gold souk and malls to snap up locally made jewellery as well as international brands. "This year we expect gold sales to rise by almost 40 percent during Dubai Shopping Festival," Tawhid Abdullah, general manager of the Dubai Gold and Jewellery Group told Reuters.

"Last year, gold sales were up by more than 45 percent during the festival period." Dubai is a long-established market for gold bullion and wholesale and retail jewellery, where the trade is fuelled by strong demand from the Arab world and India, the world's number-one gold market. Soaring gold prices have weighed on sales of the yellow metal for jewellery, deterring buyers and depressing the value of sales by 30 percent in the fourth quarter of 2007.

"Earlier this month, we saw some buyers coming in when prices went below $900 and it looked like they may stay at this level," a jeweller said. "But the sales increase we may see due to the shopping festival will slow again if prices go higher as buyers will take some time to adjust to the new prices," he added.

Gold broke to a record high $923.40 an ounce last week, as investors rush to park their funds in the safe haven of gold amid equity and credit market woes. "We are not that worried about prices during the shopping festival when we always receive keen buyers, mainly tourists," a gold wholesaler said.

The precious metal rose more than 30 percent in 2007 amid safe-haven buying due to credit market turmoil and worries about the health of the U.S. economy, which sent the dollar to record lows, as well as record high oil prices. Traders say they expect gold jewellery retail demand to be upbeat after the shopping festival if prices drop below $900 an ounce.

Dubai's gold imports rose 14.3 percent to 559 tonnes in 2007, while exports rose 4.7 percent to 287 tonnes as investor appetite for the precious metal stayed strong despite record prices, the Dubai Multi Commodities Exchange said on Saturday.

In 2007, gold sales for jewellery and investment in the UAE, a seven-member federation that includes Dubai and Abu Dhabi, rose by almost 12 percent in volume and 20 percent in value from the year before as tourism grew, the World Gold Council has said.