Gold rush as Saudi shoppers queue to beat VAT deadline

After months of lockdown, customers are back shopping for gold in the jewelers of Riyadh’s Diriyah district. (Fahad Alzahrani/AN)
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Updated 28 June 2020

Gold rush as Saudi shoppers queue to beat VAT deadline

  • Investors worldwide look to precious metal amid curfew easing and fears of second COVID-19 wave

RIYADH/LONDON: Saudi gold traders are reporting a spike in business as investors snap up the precious metal ahead of the introduction of the new 15 percent VAT rate next week.

At Riyadh’s recently reopened gold souq in Diriyah, jeweler Yaseen Ali said that visitor numbers were almost back to pre-pandemic levels.

“I wasn’t expecting this level of sales this week,” he said.

“I believe both lifting the curfew as well as the the increase of VAT to 15 percent (starting from  July 1) played a role in moving the market” Ali added.

The coronavirus pandemic has had a devastating impact on retailers worldwide and the jewelry sector has not been spared. Demand for gold jewelry plummeted 39 percent in the first quarter compared with a year earlier, according to the World Gold Council.

While demand for investment gold is strong as people turn to safe investments amid market volatility, the jewelry end of the business is more exposed to weaker consumer confidence as well as the absence of weddings and other celebrations associated with gold purchases.

Riyadh jeweler Ibrahim Awadh believes sales are still below pre-lockdown levels despite a marked improvement this week.

“Yes, we have witnessed excellent number of customers who visited the gold market this week, but the sales level is still below what we saw in the beginning of the year,” he said.

“With the lifting of the curfew, we expect to see more wedding celebrations in coming weeks, which will boost sales of gold and jewelry, although the big wedding gatherings that exceed 50 people are still banned,” he added.

Saudi Arabia is tripling its value added tax (VAT) from July 1 in an effort to increase government revenues in response to the coronavirus pandemic and weaker oil prices. The looming deadline has boosted purchases for some big ticket retail items, including jewelry, which will cost people more from Wednesday.

Gold investors worldwide have stepped up purchases in recent weeks as fears of a second wave of the coronavirus in some large economies encourages purchases of both physical gold and exchange-traded funds that are focused on the precious metal.

Gold bullion has risen more than 1 percent this week, with prices at a near eight-year high of more than $1,779 on Wednesday. It has returned 22 percent in dollar terms in the year to the end of March. 

“Gold has always been topical for investors in the Middle East,” said Alessio Cirillo, sales director at Invesco EMEA.

“Most investors buy gold as a hedge against inflation and high economic uncertainty, with some investors looking for asset appreciation. Globally, gold exchange- traded funds are recording record inflows as investors sought out liquid investment products to gain exposure to gold.”

Saudi Arabia’s 6-point plan to jumpstart global economy

Updated 25 min 59 sec ago

Saudi Arabia’s 6-point plan to jumpstart global economy

  • Policy recommendations to G20 aim to counter effects of pandemic

DUBAI: Saudi Arabia, in its capacity as president of the G20 group of nations, has unveiled a six-point business plan to jump start the global economy out of the recession brought on by the COVID-19 pandemic.

Yousef Al-Benyan, the chairman of the B20 business group within the G20, told a webinar from Riyadh that the response to the pandemic -— including the injection of $5 trillion into the global economy — had been “reassuring.”

But he warned that the leading economies of the world had to continue to work together to mitigate the effects of global lockdowns and to address the possibility of a “second wave” of the disease.

“Cooperation and collaboration between governments, global governance institutions and businesses is vital for an effective and timely resolution of this multi-dimensional contagion transcending borders,” Al-Benyan said.

“The B20 is strongly of the view there is no alternative to global cooperation, collaboration and consensus to tide over a multi-dimensional and systemic crisis,” he added.

The six-point plan, contained in a special report to the G20 leadership with input from 750 global business leaders, sets out a series of policy recommendations to counter the effects of the disease which threaten to spark the deepest economic recession in nearly a century.

The document advocates policies to build health resilience, safeguard human capital, and prevent financial instability.

It also promotes measures to free up global supply chains, revive productive economic sectors, and digitize the world economy “responsibly and inclusively.”

In a media question-and-answer session to launch the report, Al-Benyan said that among the top priorities for business leaders were the search for a vaccine against the virus that has killed more than half-a-million people around the world, and the need to reopen global trade routes slammed shut by economic lockdowns.

He said that the G20 response had been speedy and proactive, especially in comparison with the global financial crisis of 2009, but he said that more needed to be done, especially to face the possibility that the disease might surge again. “Now is not the time to celebrate,” he warned.

“Multilateral institutions and mechanisms must be positively leveraged by governments to serve their societies and must be enhanced wherever necessary during and after the pandemic,” he said, highlighting the role of the World Health Organization, the UN and the International Monetary Fund, which have come under attack from some world leaders during the pandemic.

Al-Benyan said that policy responses to the pandemic had been “designed according to each country’s requirements.”

Separately, the governor of the Saudi Arabian Monetary Authority said that it was “too early” to say if the Kingdom’s economy would experience a sharp “V-shape” recovery from pandemic recession.