By Amena Bakr
'Scrap levels will for sure be less than the levels we saw last year' - analyst.
Scrap gold volumes in the Middle East this year were expected to be lower compared to 2009 as the price has eased off its peak levels, industry insiders told Reuters on Thursday.
Last year a record volume of scrap gold entered the Middle East markets during the first quarter as the economic crisis coupled with the high price of gold forced cash-strapped consumers to sell their jewellery.
"Fresh buying in the Middle East is still low and people are still selling their jewellery but the scrap levels will for sure be less than the levels we saw last year because the price of gold is now lower," said Pradeep Unni, senior gold analyst and trader at Richcomm Global Services.
Spot gold prices were around $1,094.60 an ounce on Thursday, off a record high of $1,226.10 hit on Dec.3.
"It's really a simple rule, people buy into weakness at a time when gold is in the $980-$1050 range and sell into strength when the price is high," said Jeffrey Rhodes, the chief executive officer of INTL Commodities DMCC, an independent financial services firm based in Dubai.
"So this year I'm expecting the price of gold to be in the range of $980-$1,200 which would mean less scrap volumes in 2010," he added.
Although scrap gold originating from the Middle East is expected to be lower than last year, inflows from Pakistan and India will still remain at a "decent" level, said Mohamed Shakrachi, managing director of Dubai-based Emirates Gold, one of the largest gold refineries in the Middle East.
"I'm still very bullish on the gold price for this year and we are still seeing good levels of scrap gold coming from Asia, especially India and Pakistan where people are still booking profits by selling their jewellery," he said.
In Dubai alone scrap gold volumes are expected to meet the market's physical gold demand for the coming 3-6 months, said Richcomm Global Service's Unni.
"Its true that there is less scrap but there is still enough to meet the very weak demand we are now seeing in Dubai," he said.
Middle East fourth-quarter gold demand fell 32 percent on the year as jewellery sales continued to feel the impact of high prices and the global economic downturn, the World Gold Council said in its latest report released this month.
Egypt and the UAE saw the biggest slump in fourth-quarter jewellery demand, with Egypt falling 35 percent and the UAE 32 percent on the year, the council said. (Reuters)