Dubai's gold trade up 48%

Golden opportunity: Dubai, one of the world's major gold hubs, has reaped the benefits of renewed interest in precious metals.

The value of Dubai's gold trade jumped 48 per cent in the first half of the year to Dh48 billion (US$13bn), largely as a result of sky-high gold prices, the Dubai Multi Commodities Centre (DMCC) said yesterday. As concerns over inflation and the health of the world economy grew this year, investors directed funds into gold purchases, driving up the price to a record $1,031 per ounce on March 17.

The DMCC, which operates the Dubai Gold and Commodities Exchange (DGCX), said yesterday that the price averaged $910 an ounce in the first half of the year. Interest in the precious metal appeared to fade slightly in the second quarter, however, as the DMCC said the volume of exports fell 15.8 per cent and imports 2.1 per cent, compared to the same period last year. The price has now dropped to $862 per ounce, mirroring a 20 per cent slide in oil prices.

Dubai, which has long been one of the world's most important gold hubs, reaped the benefits of renewed interest in the precious metal, said Ian MacDonald, the director for gold and precious metals at DMCC. "Despite high volatility in prices, gold trade through Dubai continued to surge, reiterating the emirate's prominence as a global centre for gold and precious metals," he said. The volume of exports grew from 142 tonnes to 179 tonnes, a 26 per cent increase. The volume of imports fell 4.7 per cent, to 265 tonnes.

Mr MacDonald said the outlook for gold trading remained positive through to the end of the year. "Demand for gold has been resilient to global market conditions," he said. "The sharp rise in prices earlier this year has been a prime driver in improving export volumes, and has boosted the role of gold as an inflation-hedging instrument." Last week, the DGCX said that the value of gold futures traded had risen 58.7 per cent in July compared to June. The DGCX traded 109,289 gold futures contracts last month valued at $3.3bn, up from 72,829 contracts valued at $2.08bn the previous month.

Total volumes of all contracts - commodities and currencies - traded on the DGCX last month stood at 821,388 contracts valued at $43.3bn. "Interest in derivatives is certainly gaining ground in the region, as evidenced by the growing trade on DGCX," said Malcolm Wall Morris, the chief executive of the exchange. Dubai launched the region's first gold futures exchange in 2005, as the economies of Gulf nations boomed on oil income.

Total open interest for gold on July 31 stood at 1,767 contracts, down from 1,831 contracts on June 30, while average daily volume stood at 4,968, up from 3,468 the previous month, the DGCX said. The exchange offers futures contracts in gold, silver, steel, fuel and crude oil and currencies, and wants to become a major commodities centre in the region. Its activities almost doubled last year. In May, it listed two cash-settled light sweet crude oil contracts in the world's top oil exporting region in order to allow local funds in the region to invest in oil futures without taking their money elsewhere.

Total foreign assets held by the UAE Central Bank more than doubled to Dh277.24bn in the year to the end of March, the bank said last week. The central bank's foreign assets at the end of the first quarter eased almost three per cent from the end of December, when they stood at Dh285.69bn, the bank said in a quarterly report on its website. Foreign assets, including gold, at the end of March last year amounted to 129.02bn, central bank data showed.

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