Dubai Faces Gold Shortage After Prices Tumble!

• Dubai Faces Gold Shortage After Prices Tumble! 
  by Brinda Darasha, http://blogs.wsj.com/ 
  “Believe in God and invest in gold,” reads the catchline in a jewelry store in the heart of Dubai. It is a maxim that seems to have survived the recent plunge in world gold prices, with shoppers thronging Dubai’s famous gold souks and creating a local shortage of coins, medallions and bars.
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  While investors dumped gold futures last week on concerns about global growth and fears of slowing inflation, bringing prices down to a two-year low of $1,335.30 a troy ounce in Europe Monday, bargain hunters and gold bugs worldwide set off on a buying spree of the physical metal.
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  The frenzy was especially acute in Dubai, which likes to be known as the “City of Gold”. “We saw demand shoot up on Tuesday, Wednesday and Thursday,” said Tarek El-Mdaka, managing director at Dubai-based Kaloti Jewellery International Group.
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  By Friday and Saturday–a weekend in the Gulf–potential buyers were lining up three-deep at some store counters in the Gold Souk, Karama and in the Dubai Gold and Diamond Park. In one store, buyers had lined up piles of 1000 dirham notes (each worth $270) and were seen trying to persuade the salesmen to sell them as many bullion pieces as could be found.
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  Buyers tried to capitalize on lower prices for gold coins and bars in particular. In Dubai, an 8 gram gold coin–a size popular with the gold-hungry Indian community–was on Sunday selling for 1,290 U.A.E. dirham ($351) compared with AED1,460 a month ago.
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  “I’ve been receiving calls from customers wanting to know where they can to buy up gold coins and bars as jewelers have exhausted their stock,” said Biju Joy, general manager of Dubai Gold & Jewellery Group, a trade association.
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  While kilo bars are the most popular denomination for holding gold among consumers in the Middle East and Asia, at the retail level there is a strong appetite for 100, 50, 20 and 10 grams, and even 1 gram, bars and coins.
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  The appetite was such that some shops have been able to charge a premium of up to $12 per ounce over the prevailing London gold price, according to Sunny Chittilappilly, chairman of DGJG and of the Chittilappilly Jewellers. He estimated that the volume of gold, 22 carat gold and bullion combined, sold daily in Dubai market has rocketed to 300-340 kilograms per day from 100-125 kgs before the price collapse.
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  ”The situation in Dubai has surely been similar to all over the world, where smallish discounts against loco London prices changed into decent premiums for physical gold,” Gerhard Schubert, head of commodities at Emirates NBD said in a note. 
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