Dubai gold buyers switching from jewelry to bullion

Section:

By Brinda Darasha
The Wall Street Journal
Wednesday, October 12, 2011

http://online.wsj.com/article/SB1000142405297020391430457662678286998808...

DUBAI -- The recent violent volatility in gold prices is disrupting traditional buying patterns in Dubai, with customers moving from jewelry to bullion as they renew a focus on the yellow metal's investment potential, a trend that is prompting more city jewelers to stock gold in the form of coins and bars.

Dubai, known as the city of gold, is a long-established market for bullion and wholesale and retail jewelry. Its trade is fueled by demand from India, the world's number one gold consumer, and domestic consumption which, at 19 tons in the second quarter of 2011, makes the United Arab Emirates the second-largest consumer of gold jewelry and bullion in the Middle East after Saudi Arabia.

Whereas traditional retail demand was for jewelry, there has been a change in buying patterns, said Pradeep Unni, senior relationship manager at Richcomm Global Services, a Dubai-based commodity services company and a broker of the Dubai Gold and Commodity Exchange, or DGCX, which trades a gold futures contract.

... Dispatch continues below ...



ADVERTISEMENT

Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit,
Extending the Mineralization of the Southwest Vein on the Property

Company Press Release, October 27, 2010

VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include:

-- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres.

-- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres.

-- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre.

Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface.

"The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest."

For the company's full press release, please visit:

http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf



"Earlier while women would buy gold in the form of jewelry, now one can see men, finding themselves with a bit of spare cash, go into a jewelry shop and buying ten-tola bars," he says. A ten-tola bar, called TT bar in the trade, is a traditional Indian measure of weight that equals 3.75 ounces.

"Sales of gold coins and TT bars are up 30-40% on year as they aren't as expensive as the kilo bar," said Mr. Unni.

Cyriac Varghese, general manager of Sky Jewellery in Dubai, has noticed a similar trend. "When prices went up in early August, there was a drop in jewelry business and people who had spare cash moved into gold coins and bars as they thought the price would rise further," he said.

The gold price has soared 35% since January 2011 to above $1,900 per ounce in September as investors sought refuge in its safe haven status in the face of an uncertain global economic outlook and concerns about the health of the U.S. dollar.

According to Ahmed Bin Sulayem, executive chairman of the Dubai Multi Commodities Centre, those who are looking to invest in gold now are "those who don't have gold in their portfolios; people who think that in addition to having a bank account, they need to have gold." The Dubai Multi Commodities Center is one of the backers of the DGCX, and helps promote the local gold trade.

The World Gold Council, an industry organization, says demand for physical bars and coins in the United Arab Emirates--the grouping of seven emirates that includes Dubai--rose 6% in the second quarter of 2011 from a year earlier, while demand for jewelry was down 1% in the same period.

If the trend continues, it could suggest that demand for gold in Dubai is becoming more speculative, local jewelers said, since buyers appear more willing to sell their bars and coins into any rise in the price. Buyers of jewelry, in contrast, are less likely to sell for cash as women prefer to exchange it for a newer design or pass it on from one generation to the next.

"There is slightly more demand than before for bars and coins. This was also exacerbated by a shortage of supply for these in the market. We also noticed that when the price of gold fell, people came back into the stores to try sell the coins and bars back again," said Raj Sahai, director-retail, at jewelry retailer Damas.

Jewelry shops in Dubai, from souk to glittery malls, are stocking up on bullion to meet the higher demand. Damas has been ordering more coins and bars, Mr. Sahai noted.

Gold certificates are also increasingly popular. Demand for local bank Emirates NBD's Gold Certificates, which can be redeemed either in cash or physical gold bars, has risen five-fold in August and September from the beginning of the year, Gerhard Schubert, head of precious metals, at Emirates NBD said. "There's been unprecedented buying from the moment of the market opening till close," he said adding that many of the certificate buyers are fresh buyers.

However street wisdom holds that there's a marked preference for physical gold in Dubai. "Unlike in the West where people are happy to invest in gold certificates and exchange traded funds, here they like to handle gold; it's a cultural difference," said an analyst who declined to be named.

* * *

Join GATA here:

The Silver Summit
Thursday-Friday, October 20-21, 2011
Davenport Hotel, Spokane, Washington

http://cambridgehouse.com/conference-details/the-silver-summit-2011/48

New Orleans Investment Conference
Wednesday-Saturday, October 26-29, 2011
Hilton New Orelans Riverside Hotel

http://www.neworleansconference.com/

Support GATA by purchasing gold and silver commemorative coins:

https://www.amsterdamgold.eu/gata/index.asp?BiD=12

Or by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

http://gata.org/node/wallstreetjournal

Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon:

http://www.goldrush21.com/

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16



ADVERTISEMENT

Prophecy Platinum Drills 120.9 Meters
Grading 1.26 g/t PGM+Au at Yukon Wellgreen Project

Company Press Release
Monday, September 26, 2011

VANCOUVER, British Columbia, Canada -- Prophecy Platinum Corp. (TSX-V: NKL, OTC-QX: PNIKF, Frankfurt: P94P) has announced the drill results received from its 2011 drilling Wellgreen platinum group elements, nickel, and copper project in the Yukon Territory.

Borehole WS11-188 encountered 457 meters of mineralization grading 0.47% nickel equivalent (including 0.72 grams per ton platinum, paladium, and gold) from surface to the footwall contact. Within this larger swath of mineralization, the hole encountered a high-grade section of 17.8 meters of 3.14 grams per ton platinum, palladium, and gold, 1.03% nickel, and 0.74% copper (1.77% nickel equivalent).

The hole was drilled completely outside of current resource boundaries, between the East Zone resource and the West Zone resource that was reported in the company's press release no July 14, 2011.

The high-grade intercept located between the two resources not only demonstrates that the East and West Zone resource form a single, geologically contiguous body but also indicates that the higher-grade material in the East Zone continues to the west and at depth at Wellgreen.

For drill result tables and maps, please see the company's full press release here:

http://www.prophecyplat.com/news_2011_sep26_prophecy_platinum_wellgreen_...