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Dubai gold trade hit by Iraq war, price volatility

DUBAI: Demand for gold in Dubai has become even more subdued with the start of war in Iraq as fewer foreigners head to the emirate, the Gulf's tourism hub, and gold prices fluctuate on war news, traders said on Monday.

They said jewellery demand in March was down at least 15 percent from February, when sales were hit by pre-war jitters.

"Demand was even lower in March because of the war. Fewer tourists are coming and shopping malls told us there were 30 percent fewer shoppers," one trader told Reuters.

Earlier this month, the US and British embassies in the United Arab Emirates warned their citizens of an increased risk of terrorist attacks in the Gulf Arab state, particularly in entertainment venues in Dubai, due to the US-led war on Iraq.

Dubai, a regional centre for gold re-export and marketing, is largely regarded as a safe haven in the Middle East where anti-US sentiment is on the rise.

Tourists are lured by Dubai's sunny climes and liberal atmosphere in the otherwise conservative Gulf. The emirate is also home to a large expatriate community, mostly from the Indian subcontinent.

Traders quoted Dubai's 10-tola (TT) bar at between 4,620 dirhams ($1,258) and 4,645 dirhams, down from about 4,890 dirhams a month ago. A TT bar is 3.746 ounces of 24 carat gold.

Jewellery sales had been hit even before the start of the war, with less-than-expected turnover during a one-month shopping festival which began in mid-January in which the gold jewellery and bullion sector is actively involved.

"As long as the war goes on, there will be a further slowdown in demand which is also being effected by the fluctuation in prices," said Shadad Agha of A.R.Y. Jewellery.

He said March demand was 20-25 percent down from February.

International gold prices have been prone to wide swings as the market reacts to developments in the war on Iraq.

Dubai's once-flourishing bullion trade to India, the world's largest consumer, has been slashed in recent years by India's deregulation of the trade.-Reuters