Kolkata: War, or even brinkmanship that pretends to pull the trigger, usually stokes a rise in the price of gold. However, reports suggest that even as Dubai, which is not a part of the core targets of either side, is hit by Iranian missiles, it witnessing the yellow metal exchanging hands at a discount. Reports put the discounts to about $30 an ounce.
Incidentally, Dubai has been a victim of frequent disruptions of flights over the past few days with its airport coming under missile attack. The grounded flights have resulted in gold shipments being delayed from Dubai, which is one of the trading hubs of gold. Dubai is a hub for refining and exporting bullion to buyers across Asia. It receives for shipments from Switzerland, the UK and several African countries. But now with the suppliers not finding it possible to deliver shipments, gold is getting sold off at steep discounts.
Usually transported in cargo holds
“Several cargo shipments have been delayed or stranded, leading to short-term tightness in the availability of physical bullion in India,” Renisha Chainani, head of research at Augmont Enterprises, a gold dealer in India was quoted in the media as saying. The yellow metal is usually shipped in cargo holds of passenger aircraft. Airports in the UAE remain mostly paralysed after the conflict began on Feb 28. It is also quite impossible to transport the metal by land routes to neighbouring countries from where it can be loaded on to aircraft. Experts say the standard of gold bars widely used locally in Dubai is often traded at a discount to London rates. The delivery constraints have now driven the discounts even steeper.
Reluctant buyers
There is another side to the coin. In many instances buyers are reluctant to cough up high shipping and insurance costs for the gold. The extra costs come at a time when there is no certainness of timely delivery. All these have resulted in a situation where gold traders will have to wait patiently for buyers and keep paying for storage without knowing when the next buyer would arrive. Therefore, they find it convenient to offer at a discount to London price levels.
However, India, which is a heavy buyer of gold from Dubai does not have any immediate appetite for the yellow metal since there are no peak demand seasons close at hand. Also inventories are high with large imports in Jan, pointed out experts. Incidentally, Indian imports a lot of gold and the yellow metal is the second biggest item on India’s import bill after crude oil.
Reports say the price of gold has shot above the $5,000/ounce lark for the firs time this year, though very recently a strong dollar has put some downward pressure on gold prices. The last trades were reported to be about $5,172 an ounce.