Dubai investors turn to gold and silver bullion and away from jewelry
Posted on 13 October 2011 with no comments from readers
Jewelry shops in Dubai are stocking up again on gold and silver bars and coins after a 30-40 per cent year on surge in sales, with the traditional dowry of gold jewelry now making way for newly minted 1-kilo silver bars and the ten-tola gold bar, an old fashioned Indian measure equal to 3.75 ounces.
Indeed in August when the price of gold soared to a new record high of $1,923 the jewelry business dipped and the demand for bullion really took off. The price fall back to $1.530 caught these late speculators by surprise and many compounded their error by immediately selling their bullion back to the shops.
Ten-tolas
World Gold Council statistics show that demand for bullion and coins was up six per cent in the second quarter of the year in the UAE where Dubai is located and demand for jewelry fell by one per cent.
Traders have responded by ordering more bullions and coins. Emirates NBD Bank also reports high demand for its gold certificates. But the culture is really in favor of the physical metals, with silver just as popular as gold these days and stocks running low (click here).
Dubai is known as The City of Gold, a throw back to a romantic past of gold smuggling when the taxes on gold were very high in India. Gold could be perfectly legally bought in Dubai tax-free, as it still is and then exported through clandestine operations to the subcontinent at large profits. It was an early source of the wealth that built the city from a desert creek village to a modern trading hub.
DGCX volumes high
These days the big guys also trade in futures and options on the Dubai Gold and Commodity Exchange where there has also been record trading volumes this year in marked contrast to the still dead Dubai Financial Market for local stocks.
The DGCX belongs to the Dubai Multi Commodities Centre, a freezone for commodity trading whose headquarters in the Diamond Tower of the Jumeirah Lakes opposite the Dubai Marina sits on top of a massive vault.
Clearly Dubai is set to cash in on any further boom in precious metal prices and ArabianMoney thinks that is inevitable as inflation will follow the money printing of global central banks as night follows day (click here).
