Precious Metals Business: Where next for Dubai?
30th April 2012
1
Dubai continues to play an important role in the Gold
trade
• The Gold business, has witnessed very strong growth in Dubai
over the past decade
• World supply of gold in 2011 was ~ 4000 tonnes from mine
production and recycled Gold
• In 2011 an impressive 750 tonnes (18.5% of world gold supply)
of physical gold is estimated to have traded through Dubai,
most re-exported to other physical gold centres – primarily
India and Turkey
2
There has been a shift in Gold consumption pattern
over the past decade
2002
Total demand 3,374 tonnes
2011
Total demand 4,068 tonnes
• Jewellery 2,662 tonnes
• Jewellery 1,963 tonnes
• Investments bars and coins
352 tonnes
• Investments bars and coins
1,487 tonnes
• Technology 358 tonnes
• Technology 464 tonnes
• ETFs 154 tonnes
There has been a shift in
gold usage from jewellery
to Investment gold
consumption – Bars, coins
and ETFs have grown by
over 5 fold
3
There are 5 key drivers to Dubai’s continues growth
as a dominant center of Gold trade
1
Well developed logistics infrastructure
2
Proximity and alignment to large demand market
3
Mature and competitive retail as well as wholesale market
4
Holistic presence across value chain
5
Government focus on growing the sector
4
1 Dubai’s well developed logistics infrastructure
Airline
Network
World class
transport firms
▪ The distribution capabilities for precious metals are very
strong through Dubai International Airport, with the extensive
Emirates Airlines destination network
▪ Several world class operators including Transguard, Brinks,
G4S and Viamat, offering secure transportation facilities for
precious metals
▪ Massive Storage/Vaulting capacities in Dubai are massive and
Secure storage
Streamlined
government
process
Multiple trade
finance
channels
with Transguard, G4S, Viamat and Brinks are all having their
own secure facilities
▪ The streamlined government process for the movement of
precious metals into and out of Dubai, are is also a major
reason for the seamlessness of operations
▪ mulitiple channels of trade financing as well as solutions for the
Corporate and Retail trade are instrumental in providing a firstclass logistical infrastructure.
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2 Proximity and alignment to large demand market
India
• India is the biggest consumer of gold in the world
(excluding China) with demand of nearly 1000
tonnes per annum
• Dubai’s proximity and relationship with India
allows storage centrally in Dubai and shipment to
various Indian cities within a few hours
• Dubai’s Good Delivery standard is a 995 finesse
market, and that is the same standard as India and
other South East Asian region
Turkey
• Dubai maintains close relationships with Turkey
which is another potentially large off-taker for
physical Gold
• Dubai’s Good Delivery standard is a 995 finesse
market, and that is the same standard as Turkey
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3 Mature and competitive Retail as well as Wholesale
market
Presence of local and multinational retailers, trading houses, and finance
groups. Presence of a popular gold souk
Safe and secure environment provided to buy and sell, with police and
security officers present at all times
Competitive pricing due to relatively low making charges applied to
jewellery and bars, coupled with stringent and reliable hall marking testing
increases trust in the products
Mature and
Sustainable Gold
Market
Popularity of Gold including in promotions and festivals drive demand and
create continuous buzz around the commodity
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4 Holistic presence across the value chain
Refining
Wholesale
Distribution
• Primarily scrap refining - has led to a significant growth in volumes
and international acceptance of the goods from Dubai based
refineries, namely Emirates Gold and Kaloti
• Wholesale distributing companies like Bin Sabt Jewellers, INTL FC
Stone and Swiss Gold
• These companies operate both in the domestic and international
arena, thereby extending and expanding Dubai’s capabilities to a
global platform
• Niche local retailers as well as multinationals like Damas, Joyalukkas,
Sky Jewellery and Malabar Gold
Retail Distribution
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5 Government focus on growing the sector
• The DMCC provides the regulatory framework for
the precious metals business inside the Jumeirah
Lake Towers Freezone.
• Services provided to the members include due
diligence and documental support, as well as
providing an extremely flexible and professional
trading environment.
• The DMCC in liaising with the OECD and
contributing to the drafting of the OECD
Guidelines, will further enhance Dubai`s position
as a major participant in the global physical
precious metals business.
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What’s Next? Dubai is in need for a different kind of
bullion bank
• A dedicated Bullion Bank that will look for and provide answers to all aspects and
necessities arising out of the needs of its professional precious metals customer base.
• This would require all or most of the following:
• OTC Spot market making to its customers and other local bank participant
• Providing OTC forward trading capabilities in line with individual credit line
requirements for its customer base
• Buying and selling OTC precious metals with loco Dubai delivery
• Opening metal accounts for customers in order to facilitate loco Dubai trading,
• OTC precious metals business clearing loco Dubai
• Provide financing for potentially all participants of a loco Dubai trading operation.
IN A NUTSHELL : CASH FOR GOLD
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