Riyadh positions itself as a global arbitration hub

RIYADH: Gold prices may be at record highs, but that has not stopped Saudi consumers from buying. In the first quarter of 2025, demand for gold jewelry in the Kingdom jumped 35 percent year on year, even as global demand fell 21 percent, according to the World Gold Council.

That surge comes amid a global price rally, with gold breaching $3,500 per ounce in April, up from around $2,370 a year earlier — driven by geopolitical tensions, inflation fears, and aggressive central bank buying. 

“This rapid increase in the price of the bullion can be attributed to one main reason – central bank buying,” Vijay Valecha, chief investment officer at Century Financial, told Arab News. 

Yet despite the soaring cost, Saudi Arabia’s deep-rooted gold culture continues to shine, with consumers purchasing 11.5 tonnes of gold jewelry in the first quarter, up from 8.5 tonnes a year earlier.

“This feat occurred despite the 34 percent rise in prices in early 2025, demonstrating Saudi consumers’ strong demand and purchasing power,” said Valecha.

Gold in the Kingdom is more than a financial asset — it represents tradition, adornment, and intergenerational wealth. From bullion bars to minimalist 18-carat jewelry, Saudi buyers are proving resilient even as other regional markets, such as the UAE and Kuwait, witness sharp declines in demand.

Hamza Dweik, head of trading for the MENA region at Saxo Bank, emphasized gold’s cultural role, telling Arab News: “Gold is deeply embedded in Saudi traditions, especially during weddings and festive occasions. This cultural attachment ensures a steady baseline of demand, even during price surges.”

Global factors

Valecha explained that following the conflict in Ukraine, many countries grew concerned about holding excessive reserves in US dollars, prompting nations such as China and Russia to increase their gold purchases.

“China has spearheaded record levels of global central bank purchases of gold. Hence, looking ahead, the trend of gold buying by central banks is expected to continue,” he added.

​​Another push came in May, when Moody’s downgraded the US credit rating from Aaa to Aa1, citing “a sustained increase in government debt (exceeding $36 trillion), rising interest payment ratios, and persistent fiscal deficits exacerbated by political dysfunction and policy uncertainty.”

Valecha added that this marked the first time the US lost its top-tier rating from all three major agencies. 

Cultural drivers

In different parts of the Kingdom, people buy gold for different reasons. In the north, around 70 percent of buyers view gold primarily as an investment, while in the south, it is more closely tied to tradition and adornment. Gold bars and coins are also gaining popularity, with people stocking their safes with bars of varying weights and purity.

In the first quarter, gold demand in Saudi Arabia grew 15 percent year on year to 4.4 tonnes. Jewelry preferences are also shifting — from favoring diamonds to a growing obsession with gold.

More young buyers are opting for 18-carat pieces due to their affordability, modern style, and lighter tone, as they appear less yellow than 21- and 24-carat gold.

“They also have a less flashy design/colour, which makes them better for everyday use,” Valecha explained.

Digital platforms and online gold purchases are also on the rise, blending tradition with technology — from buying fractional gold and using savings apps to investing through exchange-traded funds.

“Younger generations are blending tradition with technology — embracing digital gold platforms, fractional ownership, and ETFs, while still participating in cultural gifting. This is reshaping how gold is marketed and consumed,” Dweik added.

While countries including the UAE and Kuwait have seen gold demand decline, Saudi Arabia is moving in the opposite direction, with domestic consumers leading the surge, supported by strong spending habits.

Consumer spending in the Kingdom hit an all-time high in March, rising 17 percent to SR148 billion ($39.44 billion) — the highest monthly increase since May 2021 — before easing to SR113.9 billion in April.

The shift in consumer behavior is evident across the Kingdom. Jewelers in Riyadh spoken to by Arab News reported a growing interest in custom pieces, lighter-weight ornaments, and contemporary designs that suit both festive occasions and everyday wear. 

The 18-carat trend, once seen as a budget-friendly option, has become a fashion choice, according to the jewelers. More women are purchasing gold for themselves, breaking away from the traditional gift-only narrative. 

While physical stores remain popular for high-value purchases, particularly during wedding seasons and religious festivals, digital platforms are making inroads. Online retailers like L’azurde are adapting to this demand by offering buy-now-pay-later plans, making gold more accessible to a wider audience. Popular jewelry items include 21-carat necklaces and rings, while younger buyers favor 18-carat pieces for daily wear.

Market outlook

Looking ahead, both Valecha and Dweik expect prices to remain strong. Valecha predicts gold could reach $3,700 per ounce by year-end, though he cautions short-term investors. “Buyers should assess their investment horizon — long-term holders may still find value, while short-term buyers should be mindful of volatility,” he said.

“Sustained central bank purchases, heightened investor appetite in a period of uncertainty in the economic landscape, and projected interest rate cuts drive this bullish projection. The projected price under a recession scenario is as high as $3,880 per ounce,” Valecha added.

Dweik agreed, and said: “While structural drivers support continued growth, potential corrections could occur if inflation eases or interest rates rise.”

Saudi Arabia may also be poised to grow into a regional gold trading hub. Valecha believes that with the right infrastructure and regulatory framework, the Kingdom could play a larger role in the global market. “To elevate its status, a modern, transparent gold market ecosystem and enhanced refining capabilities would be essential,” he said.

With deep-rooted traditions, rising investment activity, and a modernized retail environment, Saudi Arabia’s gold market is not only resilient — it is evolving. In a time of global uncertainty, gold continues to shine across the Kingdom.

SINGAPORE: Oil prices fell on Friday after the White House delayed a decision on US involvement in the Israel-Iran conflict yet they remained on course for a third consecutive weekly rise.

Brent crude futures were down $2.57, or around 3.3 percent, to $76.28 a barrel by 3:04 p.m. Saudi time but still set to gain nearly 3 percent on the week.

US West Texas Intermediate crude for July — which did not settle on Thursday as it was a US holiday and expires on Friday — was up marginally at $75.19.

The more liquid August contract was up around 0.4 percent, or 31 cents, to $73.19.

On Thursday prices jumped almost 3 percent after Israel bombed nuclear targets in Iran, while Iran — OPEC’s third-largest producer — fired missiles and drones at Israel. Neither side showed any sign of backing down in the week-old war.

Brent prices retreated after the White House said President Donald Trump would decide whether the US will get involved in the Israel-Iran conflict in the next two weeks.

“However, while Israel and Iran carry on pounding away at each other there can always be an unintended action that escalates the conflict and touches upon oil infrastructure,” PVM analyst John Evans said.

Iran has in the past threatened to close the Strait of Hormuz, a vital route for Middle East oil exports.

However, oil exports so far have not been disrupted and there is no shortage of supply, said Giovanni Staunovo, an analyst at UBS.

“The direction of oil prices from here will depend on whether there are supply disruptions.”

An escalation of the conflict in such a way that Israel attacks export infrastructure or Iran disrupts shipping through the strait could lead to $100 per barrel of oil being a reality, said Panmure Liberum analyst Ashley Kelty.