Commodity Online
DUBAI: High gold prices, low imports and slump in jewellery sales are these days leading to a boom in the stockpiling and sales of scrap gold in two hottest gold destinations: India and the Middle East.

“The historic price rise in gold has resulted in a big boom in old gold trade. People are going to jewellery shops to sell gold, rather than buy. Old gold is also being re-cycled as gold coins and new gold jewellery items by bullion traders and dealers to cushion the impact of the high prices in the yellow metal,” Abdul Rasheed, a bullion dealer and scrap gold trader in Dubai told Commodity Online.

He said there is an increasing trade between India and the Middle East countries, especially Dubai, in scrap gold. “While imports of gold by India have declined, India is exporting lots of scrap gold to Dubai and other destinations in the Middle East. It helps bullion traders, jewelers and the old gold owners,” Rasheed pointed out.

He added that the ongoing global meltdown has forced people sell old gold and “it looks 2009 is the year of scrap gold in India and the Middle East.”

Even as gold prices continue to be in the $900 zone, scrap gold items are flooding the bullion market. Gold refiners in Dubai and other cities in the Middle East have bought big quantities of scrap gold from foreign destinations such as gold consuming countries like China and India.

Bullion analyst Mark Robinson says at a time when gold prices are ruling on a high ground, old gold has become the most sought after commodity in the bullion market now.

Earlier, global bullion analyst GFMS said that around 500 tonnes of scrap gold was sold in the markets in the first quarter of 2009.

High levels of scrap sales are particularly being reported in the Middle East where such sales have risen 140 per cent in the past six months.

In normal circumstances, 500 tonnes is the annual sales figure for gold scrap. In fact, for the first time in the past three decades, the amount of scrap sold has exceeded the amount of new gold bought.

However, demand for gold jewellery has ebbed across the world. The World Gold Council recently announced the demand for gold as an investment product has surged the highest in the Middle East triggering sales of scrap gold.

According to market reports, demand for gold as investments has risen more than 140 per cent in the first four months of 2009 in the region.

Robison said that nearly 500 tonnes of scrap gold have entered the Middle East market in the first quarter compared with around 300 tonnes for whole of last year.

Gold refiners in the Middle East bullion market are said to me making anything from scrap gold and jewellery items including melting them into gold bars and coins.

Slumping gold imports by India is also another reason why scrap gold business is booming, In the last few years, India has been the largest importer and consumer of gold. In 2008, India imported around 400 tonnes of gold, which is mainly used for making jewellery items and gold coins.

But in the last six months, India’s gold imports have fallen to negligible levels, compared to previous years, that bullion dealers are now importing scrap gold to Dubai.  Continued...