Commodity Online
DUBAI: High gold prices coupled with economic miseries brought about by the global financial crisis are forcing people to sell their old gold. 2009 is the year of scrap gold and look at the Middle East bullion market if you need any proof.

Even as gold prices continue to march ahead to a record $1000 per ounce, scrap gold and jewellery items are flooding the bullion market across the Gulf nations. Gold refiners in Dubai and other cities in the Middle East are these days buying/importing big quantities of scrap from foreign destinations such as gold consuming countries like China and India.

“It is boom time for old gold. Tonnes of scrap gold are arriving in several Middle East cities including the gold hub of Dubai. Gold refiners and jewellers are depending on scrap gold sold by cash-strapped consumers from countries like India and China,” Dubai-based bullion analyst Mark Robinson told Commodity Online.

He said at a time when gold prices are ruling around $1000 per ounce, old gold has become the most sought after commodity in the bullion market now.

Recently, global bullion consultancy GFMS said that around 500 tonnes of scrap gold was sold in the Middle East 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.

GFMS said gold prices will average at $908.41 an ounce this year, up 4.8 per cent from 2008. Prices may cross the $1,000/oz mark this year with $1,100 an ounce a real possibility.

Evaluating markets in long term, a weaker US dollar and a potential build in inflation are likely to cause investors to increase their exposure to gold, ushering a rally into oil prices.

Official sale of gold will remain weak in 2009 as CBGA (Central Bank Gold Agreement) sales will remain below quota, GFMS said.

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.

He said refiners make anything from scrap gold and jewellery items including melting them into gold bars and coins.