Recent geopolitical events have created opportunities in precious metals, despite uncertainty in markets elsewhere, said the chief executive of Dubai Multi Commodities Centre (DMCC) on Thursday.
"Uncertainty is driving demand for gold, global equities are at all-time highs and have grown over the past ten years, there are geopolitical uncertainties and dollar weakness is positively impacting the price of gold," Gautham Sashittal told The National at the Dubai Precious Metals Conference.
He added the current elections in India, US tensions with Venezuela, Brexit and central banks increasing interest rates are all factors that are positively impacting the demand on gold as a safe haven asset. Furthermore prices are driving behaviour.
“Gold 10 years ago was at $870 an ounce, in 2011 it went to almost $1,900 per ounce, then in 2016 it dropped to $1,100 and now to about $1,300. Obviously that tracing from $1,100 to $1,300 today has to be on the back of growing demand,” Mr Sashittal said.
According to data from the UAE Ministry of Economy, the UAE accounts for about 14 per cent of the world's gold trade, and Dubai in particular is rising through the ranks as a purchase and investment destination as it accounts for 20 per cent of world sales of precious metals. Dubai’s non-oil foreign trade in 2018 reached $354 billion (Dhs1.4 trillion) despite challenges facing global trade, economic growth and foreign exchange volatility.
Gold at $40 bn, jewellery at $29bn and diamonds at $26bn, were among the top four products traded in 2018. The gold, diamond and precious metals sector is one of the most important for the UAE’s economic diversification and is expected to witness significant growth in the coming period as part of the country’s diversification objectives. Furthermore, the volume of gold in UAE exports and re-exports amounted to $17bn and ranked fifth globally in 2017.
UAE Ministry of Economy assistant undersecretary Juma Mohamed Al Kait reiterated Mr Sashittal’s sentiments.
“Gold is a safe haven asset in troubled global financial markets: recessionary fears about trade wars; consumer price inflation; and central bank buying are all reasons to be positive about bullion,” Mr Al Kait said.
“Since 2016, interest in gold from Islamic countries has soared since the Sharia standard for gold was introduced, opening the way for Muslim investors to put money into bullion and coins. If Islamic Finance institutions were to allocate just one per cent of assets into new gold products then we would expect to see demand climb by about 500 to 1000 tonnes, per annum,” Mr Al Kait added.
In recent years demand for gold has been shifting steadily east towards China and India, which today are the two largest consumers of gold. While China is the largest gold producer in the world and India has potential to mine 300 tonnes of gold, both countries are actively investing in gold.
“Gold has always been traditional investment product in large parts of China and India and continues to be that but over the past years you’ve also seen gold as an investment in the West has grown with gold ETFs coming but the third element is what we saw last year is the central banks buying large quantities of gold,” Mr Sashittal said.
“Last year for example, according to World Gold Council 659 tonnes of gold were bought by central banks, that was the largest purchases they had made since 1967.
"So, if central banks are buying gold and if the gold demand in India and China is staying where it is or growing, then indeed that shows demand for gold will always continue to be there and grow,” Mr Sashittal added.