Retail gold demand volumes in Dubai and Abu Dhabi were up around 10% in July on the year as gold prices dipped and consumers had more disposable income to spend on jewelry than a year ago, retailers said on Monday.

"The drop in the price of gold happened at the same time when tourists were coming through Dubai so that really helped pick demand up," said a jewelry trader in Dubai's old gold souk.

Retail sales represent the bulk of gold demand in the Gulf region because the investment market is in its infancy.

Spot gold prices were around $1,182.00 on Monday, down from the record high of $1,248.95 hit in mid-May when worries about euro zone debt encouraged investment in gold, seen as a safe-haven asset.

"The market has recovered a lot and it's mainly due to the price dip, as consumers see the levels right now as a good entry point for buying jewelry," said a jewelry trader in the emirate capital of Abu Dhabi.

Overall during the second quarter of this year, global jewelry demand volumes rose by 43% on the year to 470.7 tons, according to the World Gold Council (WGC).

The demand was mainly driven by non-Western markets, where consumers appeared to have adjusted their price expectations, the WGC report said.

Among the strongest performers were the UAE which saw volumes climb 29% during the second quarter of 2010, on the year and Saudi Arabia where volumes rose 29%, the report said.

After the first half of August, retailers expect gold sales to slow down again as Ramadan starts.