Yemen’s gold Market Turmoil: A Deep Dive into Price Discrepancies and Future Trends

The gold market in Yemen is currently experiencing meaningful turmoil, marked by a stark divergence in prices between Sana’a and aden. These fluctuations, driven by a complex interplay of economic factors, are creating financial uncertainty and challenging the savings strategies of Yemeni citizens. Understanding these discrepancies is crucial for anyone involved in or observing the Yemeni economy.

Decoding the Divergence: Sana’a vs. Aden gold Prices

The cities of Sana’a and Aden exhibit a growing variation in gold prices. This deep gap,represented by the price differences between the two cities,continues to enhance the financial confusion in the markets and confuses citizens’ options. A specific instance reported in early sources highlighted that Sana’a, trading with pre-2016 Yemeni currency, quoted gold at 372,000 riyals for purchase and 379,000 riyals for sale.A gram of 21-carat gold was around 46,100 riyals for purchase and 49,500 riyals for sale.

In contrast, Aden, the temporary capital, showed markedly different figures. The gold pound there reached 1,782,200 riyals for purchase and 1,932,500 riyals for sale, while a gram of 21-carat gold was priced at 222,800 riyals for purchase and 241,600 riyals for sale. these disparities are not mere anomalies; they reflect deeper economic fractures.

The Currency Split: Old vs. New Riyal

One of the primary drivers behind the gold price discrepancies is the division of the Yemeni currency into “old” and “new” versions. Sana’a predominantly uses the older currency, printed before 2016, while Aden relies more on the newer notes. This split has created separate economies within the country, each with its own valuation of the riyal. According to economists, this has a direct effect on gold prices.

The value of money changes depending on the currency that exists in each city. this difference in value directly contributes to the difference in the price of gold.

Foreign Currency Fluctuations

Another significant factor is the fluctuation of foreign currencies in the local markets. Yemen’s economy is highly susceptible to changes in global currency values, particularly the U.S. dollar. Becuase gold is often priced in dollars, any increase or decrease in the dollar’s value against the Yemeni riyal directly impacts gold prices.

For example, if the dollar strengthens, the price of gold in riyals will likely increase, making it more expensive for local buyers. These fluctuations are more pronounced in Aden, where the economy is more closely tied to international markets.

Impact on savings and Investments

Many Yemenis rely on gold as a traditional way to preserve their savings. The current price volatility is making this strategy increasingly risky. The question remains on the future influence of these changes on the local economy, especially how they affect people who rely heavily on buying gold as a way to maintain savings.

Consider a family in Sana’a who bought gold in 2020, expecting it to hold its value. If they needed to sell that gold in Aden today, they would face a significant loss due to the price differences. This situation erodes confidence in gold as a reliable store of value.

Future Economic implications

The ongoing gold market turmoil has broader implications for the Yemeni economy. With analysts monitoring price developments cautiously, wondering whether these changes are merely a temporary phenomenon or part of a long-term change in the Yemeni economic scene.

• Increased Inflation: Higher gold prices can contribute to overall inflation, as merchants adjust prices to account for the increased cost of their reserves.
• Reduced Purchasing Power: As gold becomes more expensive, citizens’ purchasing power decreases, affecting their ability to afford other essential goods and services.
• Economic Instability: The uncertainty in the gold market can exacerbate existing economic instability, discouraging investment and hindering economic growth.

Potential Scenarios and Future Trends

Several scenarios could play out in the coming months, each with different implications for the gold market and the broader economy:

1. Currency Unification: If the Yemeni goverment manages to unify the currency, it could eliminate the price discrepancies between Sana’a and Aden, stabilizing the gold market.
2. Continued Fragmentation: If the political and economic divide persists,the price differences could widen further,creating even more uncertainty.
3. External Intervention: Intervention by international financial institutions could help stabilize the currency and reduce the impact of foreign exchange fluctuations on gold prices.

Gold price Comparison: Sana’a vs. Aden (Early Sources)