Falling prices boost demand for gold bullion in Dubai
Demand for bullion in Dubai is soaring, with imports showing signs of revival on the back of falling gold prices, rising inflation and the start of the wedding season, traders and industry experts said yesterday.
A surge in gold prices to multi-year highs earlier this year put off buyers in many parts of the world and pulled down the emirate's first-half imports by 4.7 per cent to 265 tonnes.
The precious metal dropped to a nine-month low of about $773 (Dh2,839) an ounce in mid-August before bouncing back, but it is still trading far below its all-time high of $1,030.80 an ounce hit in March.
"Many here jumped into the market because either they believe gold will rise further later and want to make a profit or they are concerned about inflation and they want to hedge their risk," said Pradeep Unni, a senior analyst at Richcomm Global Services. "I think the surge that the emirate has been seeing since mid-August is likely to compensate for any earlier drops, and we will see a rise in the third-quarter imports."
Dubai is an established market for gold bullion and wholesale and retail jewellery, where the trade is fuelled by strong demand from the Arab world and India, the world's top gold market.
Gold trade through the emirate in the first half of the year surged 48 per cent to $13.07 billion from the same period a year earlier, while total exports rose 26.1 per cent to 179 tonnes, figures from the Dubai Multi Commodities Centre (DMCC) showed last month.
"We are definitely witnessing a surge in demand for gold in Dubai and physical shortages have been reported by many dealers," said Ian MacDonald, DMCC's executive director for gold and precious metals. We are also seeing demand being driven by currency concerns in the region as many investors perceive the metal as one of the few strong currencies."
Gold is seen as a safe-haven metal and a hedge against inflation. The metal is also influenced by oil, currency moves, and generally trades in the opposite direction to the dollar.
The dollar, to which Gulf currencies, except Kuwait, are pegged, has been rising in recent weeks as oil has fallen but inflation remains high across the Gulf region.
"If you look around you will feel that people are not buying anything but gold here," Mohammad Khan, a jeweller said. "People are so happy with the current prices of gold that they have been buying for Ramadan and the Indian wedding season before they have even started."