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Inside the Old Gold Souk in Dubai

By Julia Wheeler
BBC News, Dubai

Crisis is not a word that's used in Dubai's Old Gold Souk. There is no over-reaction, no sense of permanent despair, but the traders are lamenting the fact that fewer people are buying their wares.

The tourists still come to see the sparkling goods brashly displayed in the window of shop after shop.

During the evening, the place continues to bustle until 10 o'clock - it's one of the main tourist attractions in the city

However, people are not buying from the jewellers like they did before.

Safe bet

Many of those whose shops stand squashed into the three or four streets of the souk, under its wooden roof, are second or even third-generation gold traders.

Gold bangles and necklaces in a display case
The strength of the dirham reduces European tourists' spending power
Many are Indian, but they have grown up in Dubai and they have learned the gold trade from their fathers and their fathers' fathers.

In commodity terms, the gold metal in the traders' shops is worth over 30% more than it was three months ago, as internationally it is being seen as a safe bet in difficult times.

For many Asian residents, who prefer 24 carat pure gold for their family's jewellery, gold remains a reliable haven.

Tourists though are spending less.

When gold is cheap, it makes a good souvenir by which to remember Dubai and Arabia. When it is expensive, photographs of the souk may have to suffice.

Thanks to the economic crisis, many travellers have less money to spend in the first place.

And for tourists from Europe, there is another problem - they are not getting so many dollar-pegged UAE dirhams in exchange for their euros or sterling.

Benefits of gold

The World Gold Council's regional office in Dubai recently announced that for the UAE as a whole, gold jewellery sales increased by 17% last year to more than $3.7bn (2.5bn).

"Investors around the world recognise the benefits of holding gold during this time of unprecedented global financial crisis, recession and the spectre of future inflation," said the council's CEO, Aram Shishmanian.

Some of the traders remember the days of gold smuggling between the Gulf and India, when profit on successful trips was huge

"Purchasers in many of the key gold markets understand gold's intrinsic investment value and continue to buy," he added.

However, this year's figures are not expected to be so encouraging.

Over the years, the traders have seen the gold price go up and they have seen it go down.

They have lived through buoyant and turbulent times in the Gulf.

They have watched as people turn to gold for security and turn away when they think their money will earn them more elsewhere.

This downturn too, many of them feel, will pass.

Some of them remember the days of gold smuggling between the Gulf and India, when profit on successful trips was huge.

The margins on the gold jewellery they are selling today are far less impressive.

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