Dubai scrap gold market soars

Record gold prices lead to increase in flow of scrap gold coming onto market in Dubai, industry sources say.
Dubai scrap gold market soars
By Summer Said
Sun 07 Oct 2007 10:16 AM

Record gold prices have led to an increase in the flow of scrap gold coming onto the market in Dubai in recent weeks, industry sources said on Saturday.

"Since gold prices rose by end of September, we have seen an increasing amount of scrap gold in the market," said Moaz Barakat, World Gold Council (WGC) managing director for the Middle East, Turkey and Pakistan.

Last year higher prices, coupled with the collapse of the Saudi equities market, led to a mass liquidation of gold assets, with Saudi scrap volumes increasing 44%, UK-based research firm GFMS said in April.

Barakat said current circumstance in Dubai were different.

"Unlike 2006 in Saudi Arabia, the market here looks healthy, and we are seeing a significant amount being exchanged between Dubai and countries like Saudi and Egypt."

Spot gold rallied to $747.65 an ounce on Monday, its highest level since January 1980, mainly because the US dollar's fall against the euro ignited purchases from investors.

"There was also a rise in the amount of scrap from Asia," Jeff Rhodes, a gold trader based in Dubai, told Reuters.

While purchases from India's jewellers are likely to slow in coming weeks as the country enters a period when Hindus pay respects to their ancestors, in other parts of Asia the price rally has failed to deter investors and spurred aggressive sales of scrap from jewellery makers.

A senior industry source in Dubai said scrap supply had plunged by as much as 80% earlier in the year, but since gold prices started to rise jewellers and other holders were cashing in on the rally.

"If you visit the gold market now, you will see it is buzzing with even ordinary people selling their gold and some of them buying new pieces," the source said.

Dubai gold sales rose 26% in value in August year-on-year as demand from tourists increased and the economy improved, the Dubai Gold and Jewellery Group said last month.

Tax-free jewellery in the UAE's gold souks and shopping malls draws Gulf Arab and Western tourists.

Gold sales by the UAE rose 22% in terms of value in the second quarter of 2007 from the year-ago period as demand from tourists increased, the WGC said.

The Dubai Gold and Jewellery Group expects the value of gold sales in the Gulf Arab region to grow by 15-20% a year as economies expand and tourism increases.

The region's economies grew about 7% in 2006 as high oil prices fuel rapid expansion. - Reuters

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