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MoFT: UAE among the world's top 5 gold traders

posted on 04/01/2011: 3064 views



An analytical study issued by the Ministry of Foreign Trade [MOFT] has confirmed that the UAE is among the world's top five gold traders from 2005 - 2009 in both imports and exports of the commodity.

The MOFT study revealed that the UAE ranked third in exports and the second in imports in 2009, underscoring the continued success of the foreign trade structure of the UAE, which has become a pivotal trade hub between east and west.

The study also further confirms what was revealed in the International Competitiveness Report regarding the UAE's success in developing its international trade away from a reliance on oil into international commodity trade as a result of its adoption of a systematic strategy for constructing and developing the country's ports and airports and offering various logistics services in accordance with the latest systems and practices.

The study, which was prepared by Dr. Abdel-Hamid Radwan, an economic consultant with MOFT's Analysis and Trade Information Department, pointed out to the important role being played by the Dubai Multi Commodities Centre through the numerous and diverse services that it offers to the gold trade, such as financing, offering logistical services, insurance, and initiatives for the development of the sector in the UAE.

These initiatives included the establishment of entities that offered many incentives for leading companies trading in precious metals to gather under one roof and thus encourage further exchanges.

The study also revealed that the value of UAE imports of gold (including platinum-coated, raw, semi-processed or powdered gold) amounted to US$14.5 billion in 2009, registering a 10% increase from 2008. In terms of volume, 547 tons were imported in 2009 in comparison with 524 tons in 2008, registering a 4% increase. This increase in the trade of gold in 2009 affirms the special status of the gold trade in the foreign trade structure of the country.

The UAE's gold imports can be placed in two main categories that together constitute 99% of the country's total imports of this commodity; imports of gold bullion that constitute 62% of all gold imports, which are worth US$9.1 billion (366 Tons) and the imports of half processed gold that constitute 37% of all gold imports, which are worth US$5.4 billion (180 Tons).

The UAE was ranked third, globally in gold exports in 2009 with a 10% share of all global gold exports at a value of US$10.5 billion while the USA came in first place with a 11.5 share valued at US$12.1 billion followed by Australia with a 11.2% share, while Hong Kong came in 4th place with a 9.5 % share valued at US$10 billion and Canada with a 7% share valued at US$7.3 billion.

The total value of gold exports from these top 5 countries was approximately US$52 billion, constituting a 49.2% share of global gold exports.

The study affirmed that the UAE came in second, globally in gold imports in 2009, importing approximately US$14.5 billion worth of Gold, which is equivalent to 16.6 % of all global gold imports, while India came in first place with US$23.4 billion worth of Gold imports. This reveals that India alone imports more than 25% of the world's gold imports.

The value of gold bullion imports in 2009 reached US$9.1 billion constituting 62% of the total value of imports of gold with a total quantity of 366 tons.

The gold bullion supply structure is characterised by it not being geographically concentrated as it is divided among 87 countries with the top ten countries taking up a 69% share, with Switzerland coming in first with a 14.6% share and US$1.33 billion value. This is considered a diversified source of supply with reduced geographic concentration risks.

In spite of the diversity of the sources of gold bullion, their exports (including exports and re-exports) are focused primarily on two countries, which are India, with US$5.5 billion (52%) and Switzerland with US$2.2 billion (21%), with both countries enjoying a total 73% share.

Current data reveals that the UAE has achieved a gold trade surplus with India and Switzerland worth US$5.9 billion, which means that the country's export apparatus can act as a bridge for the gold trade from African and Arab states (such as Libya, Sudan, Tanzania, Yemen and Iraq) into to those two countries.

The UAE gold bullion trade balance with all countries achieved an overall US$1.42 billion surplus, as imports were US$9.1 billion while exports were US$10.5 billion, which means that there has been a strong demand for UAE gold bullion and that it is likely that stocks were used to cover the high demand.

The value of the UAE's imports of half processed gold in 2009 reached US$5.4 billion, constituting 37% of all UAE gold imports during the same year.

It is noted through an analysis of foreign trade in half-processed gold data that 96% of the imports are focused on two countries only, which are India with a 80% share and Pakistan with a 16% share. This is due to the large numbers of Indians and Pakistanis and their customs and traditions that affect the decision to import.

It is also noted that there is an absence of half-processed gold while the re-exports of half-processed gold reached US$8 Million, constituting 0.04% of the value of imports.

It is also revealed that all half-processed gold imports are absorbed by the local market, and this is attributed to the high levels of income and the large number of tourists who shop in the local gold markets that are characterised with high quality and enjoy an absence of a sales tax.

Available data has revealed that there has been a gradual increase in both the value and quantity of UAE gold exports.

However, although the growth rate in 2009 is less than the 2008 growth rate, the growth rates witnessed in the latter year are considered exceptional rates that exceeded, by three-fold, the global growth rate of gold exports.

The decline in the percentage of growth in 2009 is also attributed to the global economic crisis and its effects on the foreign trade structure.

Data also indicated that the UAE continues to achieve growth in fixed prices, especially in 2009 where it achieved a 19% growth rate although global exports of gold have registered a negative growth rate of 1.8%.

Global gold imports have witnessed a 4.8% decrease in 2009 in comparison with 2008. This decrease coincided with the global financial crisis and its ramifications.

In 2009, the value of gold exports was US$105.2 billion while imports were US$87.6 billion, registering a 20% difference that can be attributed to the attempt of many countries to benefit from the increase in the value of gold in order to cover their export obligations or other balances.

The UAE ranked second globally with its US$14.5 billion in gold imports, constituting a 16.6% share of all global gold imports, while India came in first place with US$23.4 billion, making it alone an importer of over 25% of the world's gold imports.

Gold is considered a precious metal that enjoys many unique characteristics such as resisting corrosion and an ability to be shaped and moulded.

Gold can be mixed with other metals such as copper or silver alloy to make it stronger and can also be mixed with platinum in the manufacturing of synthetic fibres.

Gold is also the metal of choice in many areas such as the manufacturing of jewellery adornments and in medicine, especially in dentistry.

In the economic sphere, gold is used as part of the official currency reserves of many countries.

In 2009, world countries collectively possessed 30.5 thousand tons of reserve gold. The USA tops the list of countries with the most gold reserves with 8.1 thousand tons of gold, followed by Germany at second place with 3.4 thousand tons.

As for the Arab states, the Kingdom of Saudi Arabia holds the first place in the Arab world, and the 16th globally, with 322 tons of gold reserves followed by Lebanon in second place in the Arab world, and the 18th globally, with 287 tons.

The global supply of gold has registered a substantial increase of 419 tons, up by 12% in comparison with 2008.

Overall, gold supply increased from 3605 tons in 2008 to 4024 tons in 2009. Used gold sales are considered to be of the main reasons behind this increase in the global gold supply, as the amount of used gold sales reached 1673 tons in 2009, registering a 357 tons increase from 2008, or what is equivalent to a 28% increase.

On the other hand, demand for gold decreased by 9% from 3811 tons in 2008 to 3480 tons in 2009.

This is primarily attributed to the reduced consumption of gold in the manufacturing of jewellery from 2193 tons in 2008 to 1759 tons in 2009, registering a 20% decrease although there has been a 14% increase in the demand for gold for investment purposes from 1179 tons to 1348 tons for the same period.

These figures and facts might appear to be contradicting to economic norms, where in spite of lower demand and increased supply for gold, the commodity's price continues to rise.

However, the reason for this can be attributed to other affecting factors such as protection against inflation measures and fluctuations in the price of the US dollar against other currencies. - Emirates News Agency, WAM

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