Souk

Also sometimes written suk, is the local name for ‘market’ throughout the Arab world. Within the souk a whole alleyway or street is often devoted just to shops selling gold jewellery, coins and small gold bars with a mark-up of 10-20 per cent over the gold price of the day.

Gold ornaments and coins cram windows in a Middle East souk
(Credit: Timothy Green)

The souk is both a social centre and a trading place, particularly for women who will spend many hours in gold shops choosing new ornaments and paying for them partly by trading in old ones. Thus the turnover in gold shops, each of which may well carry a stock of 100-200 kilos of ornaments, is substantial in comparison with a jewellery store in Europe or the United States. Customers are also very price-sensitive, trading in ornaments if the price rises, essentially taking a profit on their investments.

This response to price changes means that souks can be a signpost to medium-term gold market trends. Heavy buying in the souks indicates that the gold price is nearing the bottom of a bear cycle; selling back in the souks signals that the price is getting too high.

The swings in the ‘mood of the souks’, an indicator detected by gold commentator, Timothy Green, in the 1980s, can be significant in the hoarding and dis-hoarding pattern of gold and scrap supplies. However, trading in of ornaments to take advantage of new designs has become increasingly popular, even without significant price moves. Research into the souks in Saudi Arabia has revealed that women often exchanged ornaments for fresh designs within a few months.