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Dubai's gold trade posts significant growth in H1

The total trade value during the first six months of this year stood at $5.8 billion, more than doubling from the last year’s $2.5 billion, when the average gold price was $363.83. Currently, the average gold price is $401, according to Dubai Metals and Commodities Centre statistics. The boost in Dubai’s gold imports/exports is mainly attributed to the growth in Indian gold trade.

Colin Griffith, executive director - gold at DMCC, said that the phenomenal increase in the level of Dubai gold imports/exports during the first half of this year can be attributed to a number of reasons. Clearly despite significantly higher gold prices, consumers continue to see gold at these levels as a good investment whilst in the last couple of years the $400 level was usually a “sell signal”. Therefore higher prices have not resulted in lower demand. In addition, higher prices normally result in additional scrap business and this has clearly accelerated with higher prices, he explained. However, the most important aspect of the increase has been attributable to the growth in Indian gold trade, covered by Letter-of-Credit (LC) imports and exports, driven mainly by interest rate arbitrage on the one year dollar/rupee curve, he said.

“With the blessing of the Reserve Bank of India (RBI) this resulted in a large increase in both imports (of new gold) and exports (of old or re-fabricated gold) during the last nine months,” he added.

In July, the RBI reduced the maximum LC period from 12 to three months, an action that seems to have returned gold movements to more historic levels. With a stronger infrastructure Dubai clearly has been well positioned to handle these very high flows of gold business, Griffith said.