Dubai Gold Discount: BIG Benefit For Indians Amid Middle East War

New Delhi: Gold is being sold at a steep discount in Dubai. This is due to the war in the Middle East, which has halted flights. Suppliers' ability to transport gold and silver out of the main trading hub has been hampered. Many buyers have held back on new orders, unwilling to pay exorbitant shipping and insurance costs.

There is no guarantee of prompt delivery. Consequently, instead of paying indefinitely for storage and funding, traders are offering discounts of up to $30 per ounce to global benchmarks in London, Bloomberg reported, citing people familiar with the matter.

Several shipments were stranded on Friday, the people said. However, some gold and silver were loaded onto flights departing Dubai since mid-week.

Why is Dubai in trouble?

The United Arab Emirates (UAE), and especially Dubai, is a key hub for refining and exporting bullion for buyers across Asia. It is also a transit route for shipments from Switzerland, Britain, and several African countries. Iran's airspace has been closed due to a barrage of missiles. The US-Israeli war with Tehran continues for its seventh day.
There is no sign of a resolution.

How is gold transported?

Gold is typically transported in the cargo hold of passenger aircraft. Flights from the UAE are severely restricted. Despite this, traders and logistics firms are hesitant to transport high-value cargo by land to airports in countries like Saudi Arabia and Oman. This is because of the risks and difficulties involved, especially when crossing land borders.

What is the connection with India?

Renisha Chainani, research head at Augmont Enterprises Ltd., one of India's largest gold dealers, said:
Many cargo shipments have been delayed or stuck. This has led to a short-term shortage in the availability of physical bullion in India. However, Chirag Sheth, Principal Consultant, South Asia, Metals Focus informed the media that India is one of the largest consumers of gold shipped from Dubai.

Can buyers in India wait?

Short-term demand is relatively low. Inventories have increased due to the large volume of imports in January.

According to Chirag Sheth, "There is plenty of stock right now. But if this war continues for a few months, it will be a problem."

What about rise in gold prices?

Spot gold has risen by nearly 20 percent so far this year. It has reached above $5,000 per ounce. However, trading has been volatile. The strengthening dollar has put pressure on the metal this week. There are also some indications that refiners are facing challenges sourcing "dore," semi-refined gold bars that are typically produced at the mine site.

Samit Guha, CEO and MD of MMTC-PAMP, said India's largest metal refinery sources about 10% of its dore from a single mine in the Middle East. However, supplies have been disrupted. He said logistics costs for new contracts supplied from elsewhere have risen by 60% to 70% since the war began.