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The Rediff Business Special / Cheap-n-precious but no buyers

When gold lost its glitter

A correspondent in Dubai

Dubai's gold market has been lying low of late; the sentiment took a further beating after State Bank of India launched its Resurgent India Bonds.

So much so that the market has been devoid of the traditional bustle during the ongoing Diwali-Christmas buying season. All this in spite of prices of the precious metal being lower than usual this season.

Right through the year, gold prices in the Middle East remained steadily low. But traditional buyers, mostly Indian expatriates and tourists, have stayed off-market. According to C D Siroya, a leading Indian jeweller in Dubai, the usual pre-Diwali glitter was certainly missing this time.

D V Pathy, manager (Gulf) of the World Gold Council, has cited a variety of reasons for the low bullion sales. He reasons that the sluggish economic situation in India after the US imposed nuclear-related sanctions, has had an impact on the gold market. Non-resident Indians apparently put their money in the SBI's RIBs. Some even took loans to buy these bonds. These factors have hit the gold sales.

As if to somehow kickstart the sales again, the United Arab Emirates precious metals industry, comprising some 700 jewellery manufacturers, has decided to introduce a new benchmark for purity that is higher than the international standard specifications for gold ornaments.

The idea is to institute a new fineness standard for 21- and 22-carat jewellery, and it promises to add glitter to the business. There are about 1,000 retail and wholesale outlets in the UAE, mostly owned and run by Indians and Pakistanis, in addition to 700 gold fabrication units which are mostly in Sharjah, Dubai and Ajman.

According to the agreement, the industry's new fineness benchmark for 21-carat ornaments will be 88.5 per cent (885 parts per 1,000) as against an internationally accepted and locally stipulated 87.5 per cent (.875).

Meanwhile, in a trade-related development, the Sharjah Commerce and Tourism Development Authority has said it is planning to set up offices in India and Germany next year, as part of efforts to find new markets for its trade and tourism sectors.

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