Allegations against Kaloti fail to tarnish sales at Dubai Gold Souk

Auditor's claim that Kaloti Jewellery Group fell short of compliance requirements causes barely a ripple among traders.

Only a handful of traders at the Dubai Gold Souk had heard of the allegations and trade appeared busy and bustling. Jeffrey E Biteng / The National

Retailers and customers at the Dubai Gold Souk shrugged off the recent controversy surrounding allegations of impropriety against the city’s largest refiner of the precious metal, with traders saying that strong demand for physical gold and jewellery remained unaffected.

Last week, a former Ernst & Young auditor accused Kaloti Jewellery Group of falling short of compliance requirements. The Dubai Multi Commodities Centre (DMCC) was also mentioned in the report by Global Witness, a UK-based non-governmental organisation.

The claims have been denied by Kaloti. Its website states that it complies with due diligence standards “following the implementation of our corrective action plan”, and has installed a new compliance system.

“The accusations will raise some questions,” said Adel Merheb, founder of Tradeyourmarket.com. “I don’t think that’s strange, we are a frontier market moving towards emerging markets and these sort of things are part of the package. Investors understand that, as long as the right steps are being taken to salvage the issues.

“If the accusations are proven correct then we will need to improve the regulatory authority, but when you invest in frontier or emerging markets you are kind of aware that there is a potential for risk with regard to regulations. Rules are generally made slower than the speed markets grow.”

However, only a handful of traders at the Dubai Gold Souk had heard of the allegations and trade appeared busy and bustling, mainly led by tourists.

One trader at Al Romaizan, said: “The weekend trading was very busy. Nobody cares about the stuff in the papers, they care about what the bracelets look like and the men care about how much they cost.”

Another from from Al Ras trading said: “We are busy because gold is always wanted, it will always be wanted, so we are lucky.”

Tourists Francesca and Thomas Campbell, from Alberta, Canada visiting their daughter, said: “I’d be more surprised if the gold was real with all the stuff being sold outside, I’ve been offered more watches and handbags than you can believe. I didn’t know Dubai was famous for gold, maybe those stories will make more people come and buy it here now.”

Spot gold closed at $1,326.50 an ounce on Friday.

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