Sales by Dubai's gold industry rose by 25 per cent in October compared with the same month last year but third quarter sales fell by 30 per cent from a year ago, the chairman of a gold and jewellery trade group said. Dubai's October diamond sales were up 40 per cent on the same month of 2005, he added.

'This the first month in one year and a half that we have seen any increase in gold sales in the market,' Tawhid Abdullah, of the Dubai Gold and Jewellery Group, told Reuters. Abdullah said demand for gold and diamonds was high because of the Ramadan and Hindu Diwali holidays in the last week of October. Gold rallied to hit a 26-year high of $730 an ounce in mid-May, but failed to retain gains. It fell as low as $559.40 in early October and was quoted at $625.30/626.30 by 1127 GMT on Tuesday.

Abdullah said fourth quarter sales were seen stronger because of the Dubai shopping festival which starts next month. 'I expect the fourth quarter to be higher compared to 2005 as we are expecting customers to pour into the market during the Dubai shopping festival,' he said.

'But I expect the annual gold sales to reach the same level as last year.'