The Middle East will take a bigger share of gold demand as buyers from Kuwait to Saudi Arabia to the United Arab Emirates diversify investments and Dubai nears offering a contract for immediate delivery bullion.
MKS (Switzerland) SA, a Geneva-based bullion trader and refiner, expanded into Dubai three years ago and employs 25 people there, with the gold trade an “important market,” said Frederic Panizzutti, chief executive officer of MKS Precious Metals DMCC in the emirate. A spot gold contract due to start on the Dubai Gold & Commodities Exchange this year will draw business from London, said Gerhard Schubert, head of gold and commodities at Arab Banking Corp., a Bahrain-based bank.
“We believe the Middle East has a lot of potential to catch up with the rest of the world,” Panizzutti, 42, said in an interview in Dubai last week.
About 40 percent of the global physical gold market passed through Dubai last year, Ahmed Bin Sulayem, executive chairman of the government-owned Dubai Multi Commodities Centre, said in April.
The Middle East’s share of gold consumption was 6 percent last year, compared with 7.8 percent in 2010, World Gold Council data show. China’s usage climbed to 28 percent from 19 percent and the U.S.’s dropped to 4.9 percent from 7.6 percent. While central banks purchased about 544 tons in 2012 in the largest accumulation in about five decades, Saudi Arabia last expanded its gold reserves in February 2008, International Monetary Fund data show. The U.A.E. has no gold holdings.
MKS, which employs about 650 people in precious metals and owns the PAMP refinery in Switzerland, doesn’t have a refinery in Dubai. Panizzutti started in the gold business 18 years ago at MKS after working in equities and foreign exchange at UBS AG.
Schubert began his career trading gold in Frankfurt in 1979, and worked at Fortis and ABN Amro Markets (U.K.) in London before becoming head of precious metals at Dubai-based Emirates NBD, the U.A.E.’s second-biggest bank by assets.
Iraq said in April it bought 60 metric tons of gold in the previous two months to diversify reserves and support the value of the Iraqi dinar. There are at least 10 tons of the metal in windows at Dubai’s gold souk, a traditional Arab-style market, making it the “one of the most significant in the world,” Schubert said in a July 20 interview in Dubai.
“I would say the biggest physical markets are Hong Kong and Dubai, but in Hong Kong it’s on a wider area, it’s not as concentrated like it is in Dubai,” Schubert said.