Gold Rush From Dubai to Turkey Saps Supply as Premiums Jump
~~By Glenys Sim
 |
| Photo, Courtesy: www.thedubaisafari.com |
Surging
demand for gold from Dubai to Istanbul has pushed physical premiums in
the region to levels not seen in years as the biggest price slump in
three decades lures consumers, according to MKS (Switzerland) SA.
Premiums
paid by wholesalers and bulk buyers in Dubai to secure a 1 kilogram bar
of bullion are being quoted between $6 an ounce and $9 an ounce over
the London cash price, said Frederic Panizzutti, global head of
marketing and sales at the Swiss-based bullion refiner. That compares
with about 50 cents before the rout, Panizzutti, also chief executive
officer of MKS Precious Metals DMCC, said in an interview from Dubai.
Gold
fell to the lowest in more than two years this month on speculation
that the global economy is recovering, unleashing a purchasing frenzy
among coin and jewelry buyers from China to the U.S. Consumer demand for
jewelry, bars and coins in Turkey and the Middle East represented about
9.4 percent of the global total last year, according to the World Gold
Council. Bars have been cleared from display in the souks, according to
Gerry Schubert, head of precious metals at Emirates NBD PJSC.
“Physical
demand has been tremendous in a way I haven’t seen for a number of
years,” said Jeffrey Rhodes, global head of precious metals at INTL
FCStone Inc., who’s worked in the industry for more than three decades.
“The price collapse prompted a physical gold rush and the evidence of
the extent of that is the prolonged period of high premiums that we’ve
seen. Reports from the gold souks are that business is good,” Rhodes
said from Dubai.
Bear Market
Prices
plunged 14 percent in the two sessions to April 15, the most since
1983, and reached a low of $1,321.95 an ounce on April 16. Since then,
spot bullion has rebounded 11 percent to $1,469.54 today as the surge in
physical demand offset record outflows from exchange-traded products.
Gold is still lower in April, heading for the worst monthly loss since
December 2011 amid a bear market.
In Turkey, the fourth-biggest
gold consumer last year, bullion on the Istanbul Gold Exchange traded at
premiums of as much as $25 an ounce over the London spot price,
something that hasn’t happened in “a very long time, we’re talking
years,” said MKS’s Panizzutti.
“In the gold souk, you see some
coins left over, but the investment bars are all gone from the windows,”
said Schubert at Dubai-based Emirates NBD, the United Arab Emirates’
second- biggest bank by assets. Domestic retail prices moved to a
premium of about $5 an ounce from a small discount before the rout, said
Schubert, who has traded the metal since 1979.
Largest Center
Dubai
is the largest gold-trading center in the Middle East, according to the
Dubai Gold & Jewellery Group, an industry body that includes
manufacturers and retailers. Trade was worth about $56 billion in 2011,
up from $6 billion in 2003, according to data on the Dubai Multi
Commodities Centre website.
Gold jumped 4.2 percent last week,
the most in 15 months, as coin demand from mints in the U.S. and
Australia to the U.K. soared. The volume for the benchmark contract on
the Shanghai Gold Exchange surged to a record last week, while premiums
to secure supplies in India jumped to five times the level before the
slump. China and India are the world’s largest buyers.
Consumers
in Singapore and Hong Kong are paying premiums of about $3 an ounce,
compared with about $2 just after the rout, according to Ng Cheng Thye,
head of precious metals at Standard Merchant Bank (Asia) Ltd.
‘More Patient’
“Physical
metal is still not available,” Ng said by phone from Singapore. “The
Chinese are on holiday these few days and at this level, the market
might slow down a bit on the demand side. People are a little bit more
patient now compared with two weeks ago, where everybody was rushing for
physical metal.”
Chow Sang Sang Holdings International Ltd. said
that jewelry sales at its 44 shops in Hong Kong more than doubled in
the two weeks ended April 27 from a year ago. In China, financial
markets are closed through May 1.
“It’s not just a Middle East
story, it’s all across the globe,” said Panizzutti. “The fact that
premiums are so high, it means that no one is making enough. We are
producing 24 hours a day.”
To contact the reporter for this story: Glenys Sim at gsim4@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
.jpeg)
