Saudi investors buying more gold before VAT rate hike

Saudi gold traders are reporting a hike in sales with investors increasing their purchases of the precious metal before the value-added tax (VAT) rates go up to 15 percent next week.

Saudi Arabia is tripling its VAT rates from July 1 to increase government revenues to counter the effects of the pandemic and weaker oil prices.

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

The pandemic caused demand for gold jewelry to plummet 39 percent in the first quarter from last, according to the World Gold Council.

While people turn to gold as safe investments, the jewelry aspect of the gold business is more exposed to weaker consumer confidence.

The absence of celebrations such as weddings associated with gold purchases also pulled down demand.

With the lifting of the curfew, Riyadh jeweler Ibrahim Awadh and his colleagues expect more wedding celebrations in the coming weeks that would increase their sales of gold and jewelry.

Awadh noted that while there was an excellent number of customers who dropped by the gold market this week, sales are still below pre-lockdown levels.

Investors worldwide have increased purchases of gold in recent weeks as the threat of a second wave of the coronavirus prompted purchases of both physical gold and exchange-traded funds focused on gold.

Prices of gold bullion went up over one percent this week, pushing it to a nearly eight-year high of over $1,779 on Wednesday.