(MENAFN - Arab News) Goldsmiths and small-scale jewelry manufacturers in the Kingdom are being hit hard as customers shy away from major purchases because of soaring prices, according to traders.
Small-scale workshop owners are either suspending their operations or shutting down their businesses to prevent further losses, said market watchers.
Some traders said the gold and jewelry market in the Kingdom might be passing through a period of slump as record prices hurt consumer demand for new products.
Sales at jewelry shops and workshops have dropped to an unprecedented level as the precious yellow metal reached new highs in recent weeks, Al-Eqtisadiah reported on Monday.
Spot gold was trading at 1,871.79 an ounce on Monday, having earlier risen as high as 1,894.10, building on its strongest one-week rise since Feb. 2009.
It is one of this year's best-performing assets, now up 31 percent.
"A number of small jewelry workshops have been wiped out as they unable to withstand the sharp price increases and many investors have opted to withdraw their investments in the sector because of mounting losses," said Abdul Ghani Al-Muhammad, who owns a gold workshop in the Eastern Province. He said the price trend would cause more businessmen to close their workshops.
"Nobody is buying gold except for weddings or unless they are immensely rich," he pointed out.
"There is a lack of movement in the market. My sales have fallen to 10 percent from what I used to do in the past years," he added.
Surur Al-Harbi, a retail jeweler, claimed that some women were now interested only in replacing their expensive jewelry with cheaper varieties.
"People are now reluctant to buy gold ornaments and consequently shop owners do not buy from jewelry manufacturers," he said. He said most customers were now opting for low-priced 18-carat gold.
Another big jewelry trader in the province, Abdul Rasool Musa, said sales at large establishments had dropped by 40 percent compared to last year's figures.
Ayman Habash, a gold businessman in Riyadh, claimed that customers were mostly selling their jewelries.
People who have gold bars also find current prices attractive to make profits.
He, however, admitted the public was reacting in different ways to surging gold prices.
"Some people do not want to part with their gold because the prices are rising beyond any expectation. They fear that they may not afford to do buy them again at much higher prices."
Habash said some customers were monitoring market trends and asking shop owners whether prices would drop again so that they could buy some jewelry.
He added that many customers said they would delay their marriages until calm returned to the gold market. "No one expected the price of gold to reach its current level," said Jamil Farsi, chairman of the gems and jewelry committee at the Jeddah Chamber of Commerce and Industry (JCCI).
"No one in the gold market, or any gold analyst predicted the trend," he said.
"When the price figure was pointing to 1,600 per ounce some time ago, none of us expected that the price would reach this high or last long," he added.
A gram of gold is currently fetching around SR200, he said, attributing the price hike to global financial uncertainties and other events.