Saudi scrap gold exports grind to halt

Saudi Arabia, the Middle East's largest gold consumer, has virtually stopped exporting scrap gold as jewellers take advantage of record-high prices, traders and industry experts said on Monday.

Traders said the scrap jewellery market in Saudi Arabia provides about 20 tonnes per quarter for both domestic and regional refineries.

"Because of the bullish outlook for gold prices, people are holding on to their gold and jewellers are keeping their scrap," said Moaz Barakat, World Gold Council (WGC) managing director for the Middle East, Turkey and Pakistan.

"So the Saudi scrap remains in the market and there is hardly any flow of scrap coming out of the country," he told newswire Reuters.

Gold surged to a historic high of $914 an ounce on January 14, as investors rushed in to buy the metal on further weakness in the dollar and expectations of a sharp cut in US interest rates.

The precious metal rose more than 30% in 2007 amid safe-haven buying due to credit market turmoil and worries about the health of the US economy, which sent the dollar to record lows, as well as record high oil prices.

"So gold manufacturers and jewellers are keeping any scrap they can get hold of, either to make further gains or to avoid importing scrap or buying bullion at higher prices," a Saudi-based bullion dealer said.

In Dubai, a long-established market for gold bullion and wholesale and retail jewellery, record high prices have led to a sharp drop in the flow of scrap gold coming into the emirate in recent weeks, industry experts said last week.

Trade in both Saudi Arabia and Dubai is often fuelled by strong demand from the rest of the Arab world and India, the world's number one gold market.

In the Indian market, which accounts for 30% of global demand, buyers were restoring old jewellery for the wedding season that begins around mid-January and lasts till the end of February.

Gold is often used by investors as a hedge against inflation and as an alternative investment to currencies and bonds.

"We may start to see scrap gold coming out of Saudi if prices drop to $850 an ounce, but i don't see this happening in the first quarter of this year," another Saudi trader said.

Saudi Arabian gold sales rose almost 17% in volume and 30% in value in 2007 from the previous year as the economy of the world's largest oil exporter expanded, the WGC has said. (Reuters)

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