April 30, 2013
Gold Rush From Dubai to Turkey Saps Supply as Premiums Jump.
Surging demand for gold from Dubai to
Istanbul has pushed physical premiums in the region to levels not seen
in years as the biggest price slump in three decades lures consumers,
according to MKS (Switzerland) SA. Premiums paid by wholesalers and bulk
buyers in Dubai to secure a 1 kilogram bar of bullion are being quoted
between $6 an ounce and $9 an ounce over the London cash price, said
Frederic Panizzutti, global head of marketing and sales at the
Swiss-based bullion refiner. That compares with about 50 cents before
the rout, Panizzutti, also chief executive officer of MKS Precious
Metals DMCC, said in an interview from Dubai. Gold fell to the lowest in
more than two years this month on speculation that the global economy
is recovering, unleashing a purchasing frenzy among coin and jewelry
buyers from China to the U.S. Consumer demand for jewelry, bars and
coins in Turkey and the Middle East represented about 9.4 percent of the
global total last year, according to the World Gold Council. Bars have
been cleared from display in the souks, according to Gerry Schubert,
head of precious metals at Emirates NBD PJSC. “Physical demand has been
tremendous in a way I haven’t seen for a number of years,” said Jeffrey
Rhodes, global head of precious metals at INTL FCStone Inc., who’s
worked in the industry for more than three decades. “The price collapse
prompted a physical gold rush and the evidence of the extent of that is
the prolonged period of high premiums that we’ve seen. Reports from the
gold souks are that business is good,” Rhodes said from Dubai.
Bear Market:
Prices plunged 14 percent in the two
sessions to April 15, the most since 1983, and reached a low of
$1,321.95 an ounce on April 16. Since then, spot bullion has rebounded
11 percent to $1,469.54 today as the surge in physical demand offset
record outflows from exchange-traded products. Gold is still lower in
April, heading for the worst monthly loss since December 2011 amid a
bear market. In Turkey, the fourth-biggest gold consumer last year,
bullion on the Istanbul Gold Exchange traded at premiums of as much as
$25 an ounce over the London spot price, something that hasn’t happened
in “a very long time, we’re talking years,” said MKS’s Panizzutti. “In
the gold souk, you see some coins left over, but the investment bars are
all gone from the windows,” said Schubert at Dubai-based Emirates NBD,
the United Arab Emirates’ second- biggest bank by assets. Domestic
retail prices moved to a premium of about $5 an ounce from a small
discount before the rout, said Schubert, who has traded the metal since
1979.
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