Over the course of the oil price slump we’ve documented the far-reaching effects of falling crude. Leaving aside the capital markets for now, the downturn has rippled through oil boom towns both in the US and Canada. Take Fort McMurray (in oil-rich Alberta) for instance, where home sales fell 66% in February or Sidney, Montana where the collapse in oil revenue has left law enforcement and schools strapped for cash in the face of rising crime and crumbling infrastructure. Then there is of course Texas which, until recently, was America’s job creation engine but which shed a recession-like 24,500 non-farm jobs in March alone.
Blue collar workers in North America aren’t the only one’s feeling the pain however. Sliding crude has also taken its toll on precious metals vendors in Dubai whose customer base is drying up now that fewer Saudis and Russians are going on gold shopping sprees in the country’s Dubai Gold Souk marketplace.
Under streets and alleys covered by roofs to protect window shoppers from the intense desert sun, more than 300 stores peddle everything from ingots to Bedouin jewelry. The Dubai Gold Souk had become one of the largest such marketplaces, offering tax-free precious metal, as Persian Gulf oil wealth ballooned in the past few decades.
Now, with the plunge in crude throttling economies across the Middle East, gold buyers are harder to find. Demand for the metal is slowing in the region and Dubai has seen a drop-off in some visitors. Shopkeepers say sales are declining because tourists from Saudi Arabia and Russia have less cash to spend. Sellers offer discounts for gold that two years ago fetched a premium.
“The market is dead,” Jeffrey Rhodes, who has spent 27 years in Dubai’s gold industry and founded Rhodes Precious Metals Consultancy DMCC, said by telephone on April 21. “There’s no real demand here”...
Even with fewer shoppers in the market, which rose to prominence in the 1940s and is spaced across two buildings as high as six floors, Dubai is still a major trading hub. The weight of all the gold jewelry on display comes to about 25 metric tons, the same as five Indian elephants, according to an association representing the vendors.
Shopping trips from the Middle East “are fewer and shorter, and they spend less,” Gerhard Schubert, founder of Schubert Commodities Consultancy DMCC and a member of the Dubai Multi Commodities Centre’s responsible sourcing committee, said by telephone from Dubai on April 28. “This will be even worse after Ramadan, during the Eid holiday when you normally have a million Saudis coming over. I’m sure the numbers will be down this year”...
“We are still surviving, but everyone is worried about the future.”
Yes, everyone is worried about the future for all of the poor souls who can now only afford to go tax-free gold shopping in Dubai four times a year as opposed to say six times, but who knows, with the US Navy now escorting US flagged cargo ships through the Strait Of Hormuz (as a precautionary measure of course), one errant pot shot across the bow could be just what the doctor ordered for still-depressed crude prices and by extension, for the poor gold vendors of Dubai.