High prices lift scrap gold supply in Dubai

DUBAI — 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 yesterday.

By (Reuters)

Published: Sun 7 Oct 2007, 8:28 AM

Last updated: Wed 15 Nov 2023, 8:56 AM

"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 per cent, 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 U.S. 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, said.

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 per cent 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 per cent 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 United Arab Emirates' gold souks and shopping malls draws Gulf Arab and Western tourists.