The high gold prices and the economic downturn, which discouraged buyers, led to a fall of around 30% in gold jewellery sales in Dubai in August. Meanwhile, the fall was 40% in Abu Dhabi, the capital of the UAE, marking the worst sales this year.

The sale volumes are falling for gold retailers since the costs of the metal are increased by institutional funds looking for a safe haven for their assets, amidst the global economic slowdown.

Sanjay Brahatti, co-owner of Al Khaledyah Jewellery said: "Our sales in August have dropped by around 30% from last year because the price of gold is too high for (retail) consumers during this crisis. And if things continue like this over the coming two months, we are thinking about cutting down the number of branches to ease costs."

Thursday saw the prices for gold climbing by more than a quarter, to about US$990 an ounce from a low of US$773.90 in August last year. It sank to a one-year low of US$680.80 in October.

The fall has also resulted from a decline in the numbers of tourists visiting Dubai.

Hassan Salah, account manager at Kaloti Jewellery, a retail gold wholesaler in Dubai said: "There are far fewer tourists this year compared to last year and this, with the high gold prices, has really hit business bad."

It is being expected that by November and December, there will be some improvement in demand.