MUMBAI (Commodity Online): The deep debt crisis that the Middle financial nerve centre Dubai has fallen into has hit the bullion and base metals markets. In India, gold prices plunged by three percent on news that Dubai is caught in a debt trap.
Analysts said the Indian bullion market turned shaky on Friday on the news of Dubai debt crisis. "This is mainly due to the fact that there is a big trade in bullion, especially in gold, between India and Dubai. If Dubai is caught in a debt trap, it could affect the bullion trading between India and the Emirates city state," said Ashok Dhawan, a bullion dealer in Mumbai.
There has been a 'golden love' between India, the world’s largest gold consuming country and Dubai, a top global gold trading city. Dubai which generally exports gold to India has been these days importing the yellow metal from India.
India was the top gold trading partner of Dubai for 2008. While gold trade through Dubai rose 53 per cent to $29 billion in 2008 against $19bn in the previous year, the country that carried out the largest gold trade with the Emirates city was India.
Traders say gold trading between India and Dubai has boomed thanks to the fact that there are a large number of jewellery shops owned by Indian businessmen in Dubai, and across other Gulf countries.
Joy Alukkas, Managing Director of Joyalukkas Group, one of the largest gold business houses in India and the Middle East says India is the largest gold trading partner with Dubai because Indians are the largest expatriates working in Dubai and other Middle East countries.
Dubai has several major Indian jewellery chains like Joy Alukkas, Atlas Jewellery, Sky Jewellery and Malabar Gold.
On Friday, gold prices tumbled 3.11 per cent at India's Multi Commodity Exchange as traders off-loaded their holdings on weak global cues after reports of Dubai debt crisis, said a news report from PTI.
Trading sentiment turned bearish after reports of gold declining from its all-time high as a stronger dollar dampened demand for the precious metal as an alternative asset.
Concerns over delay in payments by a leading construction and financial major, Dubai World, rattled global equity markets and supported the US dollar, traders said.
Gold for December month contract tumbled by 3.11 per cent to Rs 17,262 per ten gram with a business turnover of 30,697 lots. February month contract plunged 3 per cent to Rs 17,205 per ten gram with a business turnover of 13,206 lots.
The steep fall in gold prices was attributed to traders indulging in reducing their positions in tandem with a weakening global trend, marketmen said.
Meanwhile, gold for immediate delivery dropped 4.2 per cent to $1,138.10 per ounce in the overseas market.
Here are some interesting facts on the gold trade in Dubai:
**The total value of the gold traded through Dubai in the second half of 2008 reached $15.99bn, up 57 per cent compared to $10.16bn during the corresponding period in 2007 and up 22 per cent compared to $13.07bn in the first six months of 2008.
**Gold imports in Dubai rose 21 per cent to reach 674 tonnes in 2008 compared to 559 tonnes in 2007 while exports rose 29 per cent to 371 tonnes compared to 287 tonnes in the previous year.
**Gold jewellery demand in the UAE dropped from 99.8 tonnes in 2007 to 93.3 tones last year although there had been a 32 per cent increase in investment demand of gold —from 7.5 tonnes in 2007 to 9.9 tonnes.
**Dubai imported gold from more than 100 countries in 2008 and exported to 64 nations.
