While bulls were looking forward to a dovish Fed statement, they seem to forget that it is based on ...
Entering a Gold Rush...Dubai Style
07/01/2013 7:00 am EST
Instead of picks and shovels, speculators are using credit cards and booking air cargo. But even the civility of 2013's gold rush doesn't mean there isn't a struggle to snap up scarce supply, writes James Doran of The National.
There is not enough space on airlines flying into Dubai to meet the rapidly rising demand for physical gold in the emirate since the price plunged to record lows this week.
The price drop led to a rush of buyers for Dubai gold from the Middle East, South East Asia, the Balkans, Turkey, and parts of Europe, according to Tarek El Mdaka, the managing director of Kaloti Gold in Dubai.
"I cannot find a place for transporting gold on Emirates, on BA, on Swiss Airlines this weekend," El Mdaka said. "I am shipping in one-and-a-half to two tons of gold every day and it is going straight out."
El Mdaka added that gold is in such short supply in Dubai that he is able to charge a $3 premium per ounce. "In the last week or so, that has gone up from $1.25, $1.50, to $1.75. But now it is $3. We are really squeezed."
Physical gold from Dubai has been selling strongly since the price of the yellow metal first plunged in April. But last week, it took another historic tumble, creating a buying opportunity for small-time investors looking for gold bars, coins, and bullion.
Late last week, gold edged up a little, with the spot price rising to about $1,235 an ounce. Earlier in the week, however, the metal fell under $1,200 for the first time in three years, capping a 12% decline in eight trading sessions.
Some parts of the Dubai market are not so buoyant as those in which Kaloti operates, however.
Gerhard Schubert, the head of precious metals trading at Emirates NBD, said that grades of gold known as 995, which would ordinarily be sold into the Indian market, are currently stuck in Dubai. The Indian government has implemented import restrictions that have been backed by the All India Gems and Jewelry Trade Federation, in an effort to shore up the tumbling rupee.
"A lot of India's gold comes in from Dubai, and all of that is stuck here right now," Schubert said.
El Mdaka, who does not sell into the Indian market, agreed. "The squeeze on physical gold in India would have a big effect on Dubai. Luckily though, there is a lot of demand coming from the rest of the world to soak it up," he said.
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