From Zakia Abdel Nabi

RABAT, Feb 1 (Reuters) - The record rise in global gold prices, followed by a sharp decline on Friday, has cast a shadow of caution over Morocco's gold jewelry market, which has entered a state of near stagnation as traders hesitate to acquire new stock at high and volatile prices.

Gold prices climbed to a new historic high of $5,595 an ounce on Thursday, driven by strong demand for the precious metal as a safe haven, before coming under sharp pressure on Friday as profit-taking accelerated and the dollar rose, pushing prices below the $5,000 an ounce level.

Amid these fluctuations, traders and customers in Morocco found themselves facing a volatile market that reinforced fears of buying, at a time when the sector was already suffering from a lack of liquidity and weak demand.

In the Ait Baha market in the capital Rabat, jeweler Mohammed, who only gave his first name, said, "Two weeks ago, when the price per gram reached 1,200 dirhams (about $131), there was demand, but after the price per gram reached 1,500 dirhams (about $150), demand declined."

He added to Reuters, "But some customers are selling their gold jewelry, taking advantage of the rising price of gold to make some profits."

He explained that goldsmiths' current activity is mostly focused on buying old jewelry from customers, then cleaning and repairing it and reselling it at prices lower than the prevailing market price. He said, "Instead of selling a gram for around 1,500 dirhams, we sell it for about 1,300 dirhams, while new gold is clearly experiencing a slump."

A customer named Asmaa Al-Adali said, "I love gold and I can't do without it. I'm always looking for something new, and I buy according to my means. If its price per gram is high today, I might be satisfied with a ring or a beautiful necklace."

An elderly woman named Fatima said, "I am confused. I only came to inspect, and in the spring my son will get engaged and gold jewelry must be bought for the bride, as you know. I don't know whether to buy now, considering that the price of gold will rise more in the coming days, or to wait, perhaps it will fall further."

Hanan Nazih said, "I don't buy with the aim of saving. Our grandmothers used to say, 'A brick in the wall is better than a jewel on a string,' meaning that investing in real estate is better than gold."

She added, "If I want to save my money, the best thing is in real estate. Also, I only own a few grams for decoration. Investment should be in bullion, for example, and this is not available in Morocco, at least for the general public."

* Cautionary trade

Seller Mohammed Nait Lahous said, "Demand is weak, and although some women buy jewelry for investment purposes, considering gold a safe haven, the jeweler cannot exhaust his stock, because he will not be able to replace it easily."

In the Oued Ed-Dahab market in the capital, Rabat, a jeweler who introduced himself as Hassan said, "The market is suffering from some stagnation. There are small traders who could not keep up with this huge increase and closed their shops."

He added, "Some affluent women still buy gold for investment, but the majority are afraid to risk investing all their savings in gold."

His colleague Ibrahim said, "It is true that there are well-off women who can afford to buy gold no matter how high its price is, but most customers deal with goldsmiths in what is called 'banking' or 'installment,' meaning that the customer chooses a piece of gold and pays a sum of money every month in installments."

He added, "That was possible when gold prices were stable for a long time, not as they are now with a new price every day... This hinders the goldsmith's trade, as these fluctuations are not in the interest of goldsmiths, otherwise we will be forced, God forbid, to close down."

* Jewelry

The legal and regulatory framework in Morocco does not allow for an organized market for selling gold bullion to individuals, in the absence of a role for banks in this field, strict customs control and money laundering concerns, which pushes local investors to be satisfied with jewelry or gold coins instead of pure 24-karat gold. Gold imports also face strict restrictions and special rules for imported jewelry.

This has led to increasing demands to open up the field to banks and facilitate the import and sale of bullion, especially given the presence of gold mines in the country.

Economic analyst Mehdi Fakir told Reuters, "Morocco has its own unique characteristics in this regard. We do not have a gold bullion market like in a number of Eastern countries, and therefore the impact of rising gold prices is reflected particularly in the jewelry market."

He added, "Women today are investing more in bank savings and real estate."

He pointed out that the demand for gold increases more in the summer with the wedding season, and if "the fluctuations continue, these customs may be affected."

Economic analyst Mohammed Jadiri told Reuters, "The rise may seem positive to savers, but it carries negative effects, as gold traders may suffer from a lack of liquidity to keep up with prices that have become fantastical and unstable."

He added, "Another issue is that even the workforce in the gold crafting sector may lose their jobs, and thus we will be facing an unemployment crisis, as there will be no demand for gold in the coming years if the rise continues... in addition to the difficulty of acquiring gold for those about to get married."

(US$1 = 9.11 dirhams)