Gold shines in Dubai as trade said to hit record $70bn in 2012

Ben Flanagan, Al Arabiya -

Sunday, 24 March 2013

Dubai’s gold trade is estimated to have exceeded $70 billion in 2012, hitting record highs as more of the precious metal is exchanged and stored in the emirate.

Official figures show the gold trade was worth around $56 billion in 2011, and the figure for last year is estimated to be at least 25 percent higher.

Ahmed Bin Sulayem, executive chairman of the Dubai Multi Commodities Centre (DMCC), attributed the rise to greater confidence in the market and the trading infrastructure in the emirate.

“We expected that the gold-trade value would go down but it went up and reached $50 billion [in 2011]. I’m hearing numbers of $70 billion for last year in gold – or $80 billion,” said Mr Bin Sulayem.

Dubai’s gold trade was worth just $6 billion in 2003, according to the DMCC website, which quotes figures from Dubai Customs. That rose to $56 billion in 2011, made up of $33 billion in imports and $23 billion in exports.

Mr Bin Sulayem said official figures for Dubai’s gold trade in 2012 would be issued soon. But other experts shared his confident early estimates for last year.

Jeff Rhodes, the global head of precious metals and chief executive of INTL Commodities at the DMCC, said that Mr Bin Sulayem’s lower estimate of $70 billion was “credible”.

“$70 billion sounds quite possible,” said Mr Rhodes. “The growth of the gold industry in Dubai has been fantastic, certainly since the DMCC was created.”

Mr Rhodes attributed the rise in Dubai’s gold trade over the last ten years to both increased tonnage of gold traded, and the rising price of the precious metal. “That’s had a multiplier effect. The price of gold has gone up five or six times over that period,” he said.

Mr Rhodes acknowledged however that gold prices over the last six months are “sharply lower”.

The Dubai Gold and Commodities Exchange (DGCX), which is part of the DMCC, said recently it plans to launch the UAE’s first-ever spot gold contracts, which will allow investors in the country to buy and sell physical gold on a domestic exchange.

Mr Bin Sulayem confirmed the plans in an interview with Al Arabiya.

“Gold spot trading is going to be there, and we’ll have a full cycle of gold trading in Dubai... It will [happen] this year,” he said. “[The DGCX] is a fully-fledged UAE gold and commodities exchange. You have the attraction of no taxes, freedom of trade, ease of business.”

DMCC, which is located in the Jumeirah Lakes Towers district of Dubai, has subterranean vaults used to store gold and other precious items.

Mr Bin Sulayem said an increase in fees to store gold in Switzerland has led to a boost in gold deposits in Dubai.

“These fees that went up shocked [investors] – they never saw this coming. And that is a huge turn-off to investors,” he said. “When they come to DMCC and set up shop, they know that for 50 years there’s no tax hikes and everything is standard. But when Switzerland does that, they get paranoid with all the stories in Europe – the Libor scandal, and the issues that the euro zone is facing, Cyprus… They’ll move to a safer place. And I’m proud to say that DMCC is that place.”

Increased confidence is also seeing a shift in business to Dubai, Mr Bin Sulayem added.

“You’re sitting above one of the largest vaults in the world. In the very short term that vault will be full,” he said.

“You’re going to see more storage coming in Dubai. Because it’s not about just the cost... You have to look at what is causing the investors to bring their valuables and store them in Dubai. And if I was to sum it up in one word, it’s confidence.”