Dubai, the Golden Oasis driving the UAE Gold Market’s Growth
„Becoming number one is not impossible – the word impossible doesn’t exist in our dictionary.“
Sheikh Mohammed bin Rashid Al Maktoum,
Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai
- Powered by Dubai, the United Arab Emirates (UAE) has grown to become one of the largest and most important physical gold trading centres in the world.
- Between 20–30% of all gold traded globally each year passes through Dubai, putting Dubai among the world’s top three gold trading hubs alongside Switzerland and London.
- Dubai’s dynamic gold trading ecosystem comprises two main hubs, the Dubai Multi Commodities Centre (DMCC) free trade zone, and the Deira Gold Souk.
- Guided by the UAE’s new Federal Gold Policy that reinforces regulation and responsible sourcing, global gold markets will have increasing confidence in the UAE’s gold sector.
- The 2024 entry of the UAE into the BRICS+ group now gives the Emirates fantastic opportunities to increase gold trading with the world’s gold powerhouses of China, India, Russia and South Africa.
Introduction
From ancient Egypt to the Persian and Ottoman empires, and from the historical Islamic world to the present day, the Middle East has long been associated with gold. In fact, it’s difficult to think of commerce in the Middle East without thinking of bustling gold bazaars and ostentatious displays of gold wealth.
That’s because gold in the Middle East is embedded into both cultures and economies, and the peoples of this region have not just a love of physical gold but a deep-rooted appreciation of the value of physical gold in providing wealth preservation.
Nowhere in the Middle East is the importance of gold more apparent than in the United Arab Emirates (UAE), particularly in the dynamic Emirate of Dubai, the City of Gold, which via its iconic gold souks and free trade zones, has rapidly emerged as one of the world’s largest physical gold markets, and one of the world’s biggest gold trading and transit hubs.
Between 20–30% of all gold traded globally each year passes through Dubai, putting Dubai among the world’s top three gold trading hubs alongside Switzerland and London.
Having only been established just over 50 years ago, the UAE as a nation has witnessed spectacular economic growth since its founding, and its gold sector has grown in parallel, supported by an advantageous combination of world class transport infrastructure, business-friendly government policies, and a strategic location at one of the major trade crossroads of the world.
Source: www.nationsonline.org
The Growth of the Dubai Economy and Gold Market
Since its independence in 1971, the UAE has been one of the world’s leading success stories, undergoing an economic transformation from an oil producing nation into a leading regional trade and business hub. The UAE comprises a federation of seven emirates, with the Emirates of Dubai and Abu Dhabi being the largest and most populous of the Emirati economies.
Economic growth in the UAE was initially fueled by development of the Emirates’ vast oil reserves, the revenue from which was then invested into developing the country’s trade and transport infrastructure. This in turn supported the UAE’s economic diversification into trade and commodities, into the financial sector, and into tourism and real estate. In parallel, the UAE government pursued businessfriendly government policies and the establishment of many free trade zones, especially in Dubai.
The UAE’s financial sector, with the government’s backing, is also becoming a leading global financial center, comparable to Singapore, Hong Kong and even London and New York. To this end, there are now three international securities exchanges in the UAE, namely the Dubai Financial Market, the Abu Dhabi Securities Exchange, and NASDAQ Dubai, as well as two specialist financial free zones in the form of the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM).
In the tourism sector, Dubai is now the “Middle East’s Leading Destination”, having won this accolade at the 2023 World Travel Awards. Dubai is now also the third highest ranked city globally for international visitors in the 2023 Euromonitor rankings with 16.8 million visitors, behind Istanbul and London, but ahead of Paris and Bangkok.
The strategic geographic location of the UAE has also helped the Emirates in becoming the important trade entrepôt and global trade and logistics hub that it is today. Positioned at the heart of the Middle East, the UAE lies at one of the major trade crossroads of the world and is literally where East meets West and North meets South along the ancient Silk Road. To the north lies Iran and Central Asia, to the east lies India and Southeast Asia and China, to the west Turkey and Europe, and to the southwest the continent of Africa.
The UAE’s gold market, centered in Dubai, has also grown immensely over the past 25 years, mirroring the wider growth of the UAE economy, and in many ways due to the same factors of strategic geographical location, modern infrastructure, and government-friendly gold sector policies.
The gold sector’s growth has also been guided by the UAE government’s economic policy goal of diversifying the UAE economy away from hydrocarbons towards other commodity flows, to such an extent that the gold trade now accounts for nearly 30% of total UAE non-oil exports.
Traditionally, Dubai is known as the “City of Gold”, due to its long history as a gold trading hub, most famously in the Deira Gold Souk area, where an extensive network of wholesale and retail gold traders operate with connections all over the Middle Eastern, African and Asian gold markets.
However, there is also a more modern Dubai gold ecosystem of free zones, gold refineries, and strategic government initiatives which have leveraged this traditional gold market infrastructure.
Given its strategic location, Dubai is ideally positioned in proximity to both several gold-producing countries across Africa and central Asia, and also numerous goldconsuming countries, such as India, China, Thailand, Turkey, Saudi Arabia and Egypt. This strategic location allows Dubai to be a cost-effective transit point between sourcing gold supply and meeting gold demand, thus creating a constant flow of physical gold through the UAE.
Taking advantage of these natural strategic benefits, and facilitated by its globally connected air transport infrastructure, the Dubai gold sector has become an intermediary and transit hub allowing the movement of vast international gold shipments between gold-producing and gold-consuming countries. These gold movements are facilitated by Dubai’s Emirates SkyCargo and Abu Dhabi’s Etihad Cargo, the respective cargo divisions of Emirates Airlines and Etihad Airways.
And given that much of the gold entering the UAE is in the form of doré bars from mines as well as scrap gold for recycling, the gold entering the UAE is generally further processed in the UAE’s numerous gold refineries.
Not to forget that the UAE, and particularly Dubai, also hosts an extensive array of precious metals vaults and secure transport and logistics operators for transporting gold into the UAE, storing it, and transporting it out again.
Dubai’s Gold Ecosystem
Dubai’s gold market operates from two main locations, the Dubai Gold Souk in Deira and the Dubai Multi Commodities Centre (DMCC) free trade zone in Jumeirah Lakes Towers (JLT).
UAE Gold Imports and Exports, in Tonnes, 2003–2019
Source: UN Comtrade, DMCC, Incrementum AG
Dubai Gold Souk
The Dubai Gold Souk is Dubai’s historical gold market. Located in Deira near Dubai Creek, the Gold Souk is perhaps the world’s largest retail and wholesale gold market, with over 900 gold jewellery and gold bullion outlets spanning the lanes and buildings of the historic Gold Souk on one side of Al Khot Street and the new, modern Gold Souk extension on the other.
The immensity of the Dubai Gold Souk is hard to fathom, with endless gold jewellery and bullion shops in a maze of streets and entire shopping malls dedicated to gold, such as the Gold Land Building and The Gold Centre. Hundreds of Indian and Arab gold traders also operate offices in the Gold Souk, discreetly located on the higher floors of buildings, coordinating much of Dubai’s gold imports and exports.
While Dubai’s Gold Souk has been an important regional gold trading center since the 1900s, it has grown in importance in the last 25 years thanks to the huge boom in tourism into Dubai as well as the Dubai government’s initiatives in supporting and growing the gold sector.
Gold jewellery companies dominate the Gold Souk, from the mega Indian enterprises such as Malabar Gold & Diamonds and Joyalukkas, the UAE’s Damas Jewellery, and countless lesser-known brands. There are also many specialist gold bullion dealers dotted around the Souk, in the maze of backstreets of the old Gold Souk, in the Gold Land Building, and also in the Gold Souk extension.
These bullion dealers sell a variety of gold bars, from 1 kilo cast bars, to ten- and five-tola gold bars, to 100-gram gold bars, and all the way down to smaller minted gold bars. A ten-tola gold bar is equivalent to 3.75 troy ounces. Gold bar brands popular in the Gold Souk include Swiss brands PAMP and Valcambi, and Dubai brands SAM Precious Metals, Etihad Gold and Emirates Gold.
The UAE’s population demographics are also conducive to local gold demand, with over 60% of the UAE population being expats from India, Pakistan and Bangladesh, and another 20% from the Philippines, Sri Lanka, Egypt and Iran, all nationalities that like to keep their saving in the secure store of value of gold bars. Emiratis, who make up about 10% of the UAE population, are also well-known for their love of investing in physical gold.
Each day in the morning and afternoon, the Dubai Jewellery Group, a trade association representing over 600 members in the Gold Souk publishes its “Retail Gold Rate” in dirham (AED) per gram. This Gold Rate is essentially the international spot price with a small markup, and gold bullion and gold jewellery companies throughout the UAE then use the twice daily Gold Rate as the basis for pricing all their transactions of bullion and bullion jewellery.
Approximately 500 tonnes of gold bullion is traded in the Gold Souk annually, as well as between 240 and 260 tonnes of gold jewellery, which include locally manufactured gold jewellery and gold jewellery imported from India, Turkey, Hong Kong and Southeast Asia. Dubai is well known as a destination for hand-carried gold, which air passengers bring in on flights, particularly from African countries. Nearly all of this gold hand carried into Dubai ends up being sold in the Dubai Gold Souk, including gold such as doré bars that requires further refining. There are no customs nor import duties on bringing gold bullion into the UAE/Dubai, and no limits on the amount of gold that a person can hand carry into the UAE, as long as importers have a VAT-registered entity.
While a majority of gold jewellery and bullion outlets in Dubai are located in the Dubai Gold Souk, there are also many other gold specialist areas in other parts of Dubai, such as a dedicated gold souk of hundreds of gold jewellery outlets in the gigantic Dubai Mall, as well as a dedicated gold jewellery mall on Sheikh Zayed Road, called the Dubai Gold and Diamond Park.
Source: WikiCommons
Dubai Multi Commodities Centre (DMCC)
In addition to the Gold Souk, the other major nexus of Dubai’s gold sector is Dubai Multi Commodities Centre (DMCC), a free zone authority established in 2002 by the Government of Dubai as part of its strategy to diversify the Dubai economy and promote the Dubai Emirate as a global commodity trading and business hub.
Physically, DMCC comprises all of the Jumeirah Lakes Towers (JLT) district and adjoining Uptown Dubai district, a huge development of nearly 100 high-rise buildings in a campus-style precinct, located near the Dubai Marina and Palm Jumeriah, and not too far from Jebel Ali port. When established in 2002, the strategic goal of DMCC was to provide a full range of facilities and services for trading in gold, diamonds and other commodities.
Courtesy of DMCC
Fast-forward to the present day, and DMCC’s gold ecosystem now includes the Dubai Gold & Commodities Exchange (DGCX), a number of gold refineries and precious metals vaults, and hundreds of gold trading and wholesaling companies located in offices within the JLT. DMCC also runs the popular annual Dubai Precious Metals Conference (DPMC), the largest gold conference in the Middle East, where we gave a keynote speech last year.
DMCC is overseen by its Executive Chairman and CEO, Ahmed Bin Sulayem, who has seen the free zone grow from just 28 member companies in 2003 to a massive 24,000 DMCC member companies in 2023, from 180 countries, more than 1,000 of which operate in the gold and precious metals sector.
DMCC and its Executive Chairman are very much in favor of physical gold and in growing physical gold markets. On many occasions they have pushed back against the attempted dominance of the London Bullion Market Association (LBMA) and its bullion banks, and prefer a collaborative approach where the world’s gold centers are treated as independent and as equals.
The impact of DMCC on Dubai has been so significant that DMCC now represents 11% of Dubai’s foreign direct investment (FDI). In 2023, DMCC was voted the Global Free Zone of the Year by The Financial Times’ FDI Magazine for a record 9th year in a row. In 2020, ownership of DMCC was transferred from the Government of Dubai to the Investment Corporation of Dubai (ICD), which is also fully owned by the Government of Dubai.
Q&A with Ahmed Bin Sulayem, Executive Chairman and Chief Executive Officer, DMCC
Q: How pivotal has DMCC been since 2002 in making Dubai into one of the world’s largest gold markets, and how has DMCC helped develop Dubai’s gold ecosystem?
From the outset, our goal has been to transform the emirate into a global trade hub. Just as we have achieved this for other commodities such as diamonds, tea and coffee, this also holds true for one of our other core priorities – gold. DMCC has been instrumental in catalyzing the evolution of Dubai into a leading gold market, to the extent that it is now one of the largest hubs for the physical gold trade.
We have meticulously nurtured the gold ecosystem in Dubai by creating a specialized environment that prioritizes the growth of precious metals businesses. Through the provision of world-class infrastructure, state-of-the-art facilities and a comprehensive range of products and services, DMCC has empowered businesses in Dubai to trade efficiently, and importantly, with confidence.
A great example is the Dubai Commodities Clearing Corporation (DCCC), which acts as the central counterparty for clearing and settlement services to the Dubai Gold & Commodities Exchange (DGCX). Since its establishment in 2005, DCCC has emerged as the largest clearing house in the MENA region by volume, providing derivative contracts services across key asset classes, including base and precious metals, oil and gas, and currency pairs. To date it has cleared a total of 175 million contracts and in 2023 registered a total value of USD 115bn. In almost 20 years, DCCC has become one of the most prominent offshore exchanges for INR Futures and the first Shari’ah-compliant spot gold contract exchange.
Through offering such a transparent and collaborative ecosystem that serves the entire gold value chain, DMCC bolsters investor confidence, facilitates innovation, fosters synergies and drives the continuous evolution of the gold market in Dubai and the UAE. With the transition of economic power from west to east, and an even broader range of products and services to come online, Dubai and DCCC are poised to play a far more prominent and multinational role.
Q: What key initiatives are the UAE, Dubai and DMCC now focusing on to enhance Dubai’s gold market?
The UAE, Dubai and DMCC, both individually and collaboratively, are currently spearheading a series of strategic initiatives and activities that are designed to bolster our competitiveness and attractiveness as a premier destination for gold trade.
From our perspective, DCCC’s gold services continue to add value to Dubai’s gold market. Beyond clearing and settlements, DCCC offers a secure and accessible destination to store gold as it is home to the MENA region’s largest vault and several of the world’s largest refiners. DMCC also works closely with logistical operators such as Brinks and Transguard, while Dubai’s two international airports mean fast and direct access either for import or export purposes. Supported by the DMCC Tradeflow system, a dedicated online platform for registering ownership of commodities and their subsequent transfers, Dubai is already home to 25 per cent of the world’s gold trade, while the volume of gold contracts cleared through DCCC exceeded USD 4.97bn in 2023.
Responsible sourcing is also a critical part of our growth journey. At the highest level, the Ministry of Economy’s Gold Bullion Committee runs the UAE Good Delivery Standard to enhance responsible sourcing practices in line with OECD guidelines. At DMCC, we also work hard in this area to ensure our members can operate with confidence. This includes our collaboration with the World Gold Council earlier this year to drive innovation and sustainability in the gold sector, particularly around critical issues such as the illicit hand-carried gold trade.
More broadly, the pursuit of Comprehensive Economic Partnership Agreements (CEPAs) with gold-producing countries underscores the shared commitment to facilitate seamless trade and investment flows in the gold market. By streamlining regulatory processes and reducing trade barriers, Dubai aims to attract greater investment and strengthen its position as a preferred destination for gold trade and investment.
Q: As the gold market shifts from West to East, can the Dubai gold market now surpass London and Switzerland, and will UAE’s BRICS membership be beneficial?
The dynamics of the global gold market are rapidly evolving, and I firmly believe Dubai is favorably positioned for sharp future growth, while complementing traditional hubs like London and Switzerland. With its strategic geographical location bridging key markets in Asia, Africa and Europe, it serves as a gateway for gold trade between East and West.
Key trends such as de-dollarization among leading BRICS economies and the latest gold rush of the world’s central banks in the face of a strong dollar and falling inflation expectations, continue to reshape global gold markets. Global economies are in a state of transition, and the UAE has emerged as a centralized destination for people and businesses. Whether through companies establishing trading hubs, or high-net-worth individuals hedging their assets or liabilities in a transparent jurisdiction, the UAE has achieved a state of global neutrality, while offering considerable advantages for its residents and investors. Business has continued to surge since our departure from FATF’s grey list earlier this year, while we were ranked as one of the most trusted countries in the world by the 2023 Edelman Trust Barometer Global Report.
I think a key element to this is the support of DMCC, which means the emirate offers a comprehensive ecosystem for businesses operating in the precious metals industry. This greatly enhances the appeal of setting up a gold business in Dubai, which in turn facilitates greater trade through the emirate. The story is reflected in our numbers – in 2023, DMCC maintained record growth with 2,692 new companies joining its community, accounting for 11% of Dubai’s total FDI inflows. This is compounded by the UAE’s membership of BRICS, which offers a unique opportunity to further enhance the standing of Dubai in the global gold market. As a member of this influential group of emerging economies, the UAE stands to benefit from increased collaboration, trade diversification and investment flows, cementing its position as a preferred destination for gold trade and investment. Dubai’s historic moniker as the “City of Gold” owes much to its renowned Gold Souk, dating back to the early 1900s. However, our strategic investment in the gold sector coupled with proactive government support have propelled gold trade in Dubai to unprecedented heights. I see this trajectory increasing in the coming years as trade flows shift eastwards.
Dubai Gold & Commodities Exchange (DGCX)
Dubai Gold & Commodities Exchange (DGCX) is an electronic commodities and derivatives exchange, founded in 2005, that has become the largest gold and commodities exchange in the Middle East. Fully owned by DMCC, the DGCX is located in DMCC’s Jumeirah Lakes Towers complex, and is regulated by the UAE Securities and Commodities Authority (SCA).
Contracts offered on the DGCX include precious metals futures and spot contracts, as well as crude oil futures; currency futures, including some currencies of G7 and BRICS currencies; and equities futures.
In the gold category, DGCX offers a suite of contracts including physical daily gold futures, a spot gold contract, a Shariah gold contract, cash-settled gold futures, and India Gold Quanto futures. The daily gold futures, the spot gold contract, and the Shariah gold contract are all physically settled with delivery of gold warrants representing vaulted gold bars. The spot contract settles in UAE Good Delivery 0.995 purity 1-kilo gold bars. The Shariah gold contract settles in “1 kg allocated and segregated gold bars with a minimum purity of .995”. The daily gold futures contract settles in UAE Good Delivery 400-oz gold bars.
DGCX is an important contributor to the regional gold market as it allows price discovery during Middle East hours while offering hedging and risk management to the region’s gold sector participants.
Gold refineries
The UAE has an extensive range of gold and precious metals refineries, particularly in Dubai and DMCC, but also in the emirates of Sharjah and Fujairah. These refineries are an integral part of the UAE gold sector, and process both gold mine doré and scrap gold into high-purity gold for both the international and domestic markets. Note that none of the UAE’s gold refineries are on the LBMA Good Delivery List.
The UAE’s main gold refineries include:
- Emirates Gold DMCC, founded in 1992 by Mohamad Shakarchi. Emirates Gold operates as a DMCC company, and its refinery is located in the JLT campus. Emirates produces a full range of cast and minted gold bars as well as a range of silver bars.
- Al Etihad Gold DMCC, also located in the DMCC precinct. Founded in 2009, Al Etihad Gold has one of UAE’s highest precious metals refining capacities, and produces a number of gold bars from kilo bars to 10-tola bars, to 100-gram gold bars.
- SAM Precious Metals, located in a district called Dubai Production City, about 15 km from the DMCC campus. SAM was founded in 2018 by a team led by Sami Abu Ahmad who was previously general manager of Al Etihad Gold. SAM produces a full range of gold and silver cast and minted bars, and also operates a precious metals refinery in Cairo, Egypt.
- MTM&O Gold Refinery DMCC, located in Dubai in the DMCC, and part of the Kaloti group. Historically, Kaloti was one of the first gold refineries in the UAE, founded by Munir Al-Kaloti and located in the emirate of Sharjah, before the refinery moved to Dubai. MTM&O, which is named after the four co-founders Munir Kaloti, Tarek Medakka, Monzer Medakka, and Osama Kaloti, claims to be “one of the largest refineries in the world”, with “a capacity to produce up to 1,400 tons of gold and 600 tons of silver per year”.
- Gulf Gold Refinery, located in the emirate of Sharjah, within the Sharjah airport free zone (SAIF). It was founded in 2012 and produces a range of gold bars.
- International Precious Metal Refiners (IPMR), a gold and silver refinery located in the Khalifa Industrial Zone (KIZAD) in Abu Dhabi, with a branch in the Sharjah airport free zone.
- Fujairah Gold, a precious metals refinery located in Fujairah Free Zone in the Emirate of Fujairah, and owned by natural resources company Vedanta Resources. It produces a range of cast and minted gold bars from kilo bars to 10-tola and 100-gram bars, as well as silver bars.
Precious metals vaults and security carriers
As the world’s largest physical gold trading and transit hub, Dubai not surprisingly also has numerous precious metals vaults and secure transport companies, including Brinks, Transguard, Loomis and Ferrari.
- Brinks Global Services UAE: Within the DMCC campus in JLT, DMCC owns the “largest non-sovereign vault in the Middle East”, which is located within the basement of the Almas Tower. While owned by DMCC, this precious metals vault is operated by Brinks. Brinks also operates additional precious metals vaults in the Dubai Gold Souk and Dubai Airport free zone.
- Transguard, which is one the Middle East’s biggest security companies and a division of the Emirates Group, operates precious metals vaults and strong rooms in Dubai Airport, the Dubai Gold Souk, DMCC and in Dubai International Airport. In fact, Dubai Airport’s valuables cargo terminal is operated by Transguard, and Transguard is the only company authorized to escort valuable cargo to and from aircraft and the airport cargo terminal vaults.
- Loomis International operates a secure vault within Dubai Airport free zone.
- Ferrari Logistics operate a secure vault in the DMCC and has a presence in Dubai Airport free zone
Gold trading companies and banks
An astonishingly large number of companies are involved in the gold “trading” sector in the UAE, particularly in Dubai. According to a 2019 report by Dubai’s Department of Economic Development (DED), there were 4,086 companies operating in Dubai’s gold sector, of which 2,498 were licensed for “jewellery and jewels of gold and silver”, while 1,184 were licensed for “trading in gold and precious metals”.
The largest concentration of businesses was in the Deira area of the Gold Souk. While the report didn’t specifically mention DMCC, remember that more than 1,000 DMCC member companies operate in the gold and precious metals sector.
Overall, gold trading includes companies that source gold for refining in Dubai, from mining companies such as in Africa and from gold scrap aggregators in the UAE and abroad; companies that ship in refined bullion from markets such as Switzerland and Istanbul; and companies that export gold from the UAE to other markets around the world.
Out of this huge number of gold trading players in the sector, some of the main gold traders active in the Dubai gold market (many of which are in the DMCC) include:
- Dubai gold refineries: SAM Precious Metals, Al Etihad Gold DMCC, Emirates Gold DMCC, and MTM&O Gold Refinery DMCC (Kaloti group).
- UAE-based gold trading members of the London Bullion Market Association (LBMA): Peekay Intermark DMCC, Vintage Bullion DMCC, Gold Standard DMCC, Ashoka Global.ae DMCC.
- Large regional jewellery companies: Malabar Gold and Diamonds, Joyalukkas, and Damas.
- DMCC companies authorized to import gold from the UAE into India: a selection being AgaOne Commodities DMCC, DSV Trading DMCC, Kairos International DMCC, IGR Metals Trading DMCC, Aurum International DMCC, Mazyood Jewellery DMCC, Al Bogari DMCC, and Krishi International DMCC.
- Others: MAH Gold and Jewellery, Swiss Gold DMCC, Met Gold DMCC.
In tandem with the Dubai gold sector, the UAE also has an extensive banking sector of both domestic and international banks, including domestic banks involved in the gold sector such as Rakbank, Emirates NDB, and National Bank of Fujairah, as well as many leading international banks such as Standard Chartered, ICBC, HSBC and Citi.
Consumer Gold Demand in the UAE
Based on WGC data, the Middle East saw total consumer/retail gold demand of 285 tonnes during 2023, of which 171 t was gold jewellery demand and 114 t gold bar and coin demand, with the highest gold jewellery demand countries recorded being the UAE with 40 t, Saudi Arabia with 38 t, and Iran and Egypt with 27 t apiece. Within the gold bar and coin demand category, the WGC claims that Iran saw gold bar and coin demand of 44 t in 2023, followed by Egypt with 30 t, Saudi Arabia with 14 t, and the UAE with 11 t.
While it’s unclear how the World Gold Council and Metals Focus calculate this data, these consumer gold bar and coin demand figures for the UAE look seriously underestimated given the enormity of the retail Dubai gold market. Indeed, anecdotally, gold sector observers in Dubai say the figures for retail gold bar and coin demand could be 3 times higher than the WGC data due to underreporting.
Shari’ah-Compliant Gold
As a predominantly Islamic region, it’s important to many people in the Middle East that investing and transacting in gold is allowable within Islamic finance, and that financial products, services and transactions are Shari’ah-compliant. In terms of financial products and transactions, Shari’ah compliance, for example, would mean that these products and transactions avoid the charging of interest, avoid ambiguity, avoid speculation, be backed by tangible assets, and be ethically and socially responsible.
Relatively recently, a number of Shari’ah rulings have added certainty to investing and trading in gold within Islamic finance. These include a 2016 Shari’ah Standard on “gold and its trading” issued by the Bahrain-based Accounting and Auditing Organization of Islamic Finance Institutions (AAOIFI) in conjunction with the WGC, and which the WGC said would allow the development of “gold investment accounts, physical gold ETFs, spot contracts and regular gold savings plans”.
Following this in 2018, the world’s first Shari’ah-compliant spot gold contract was launched on Dubai’s DGCX. With Dubai aiming to achieve the status of a global financial center and at the same time appeal to investors from the Middle East, the ability to offer Shari’ah-compliant gold products and services should be helpful in strengthening Dubai’s position in the Islamic finance segment of the market.
UAE Federal Gold Policy
In recent years the UAE has actively strengthened the infrastructure and regulatory environment of the UAE bullion market via a federal gold policy administered by the UAE Ministry of Economy (MoE).
This policy aims to increase the contribution of the gold sector to the country’s economic growth by boosting the volume of UAE gold and jewellery exports. Out of this federal gold policy, a new Emirates international gold standard called the UAE Good Delivery (UAEGD) standard was launched in late 2021.
Similar to the LBMA London Good Delivery standard, the UAE Good Delivery standard for gold and silver is a quality and technical framework which promotes technical proficiency in precious metals refinery production standard specifications of tradable/good delivery precious metals bars. Like the LBMA Good Delivery standard, the UAEGD standard also operates on the basis of accrediting good delivery refiners, which the UAEGD refers to as Accredited Members.
The UAE Good Delivery standard is administered by the Ministry of Economy’s Emirates Gold Bullion Committee, of which the Minister of State for Foreign Trade, Thani Al Zeyoudi, is chairman. By reinforcing the governance and regulation of the UAE gold sector, UAE Good Delivery will strengthen UAE’s position as a global gold bullion and jewellery trading hub and give international markets more confidence in UAE Good Delivery bullion products, thereby making the UAE gold sector more competitive.
While the UAE Good Delivery Standard defines product specifications for a 1-kg gold bar of either 99.5% or 99.99% gold purity and a 400-oz gold bar of 99.5% gold purity or above, it also defines standards for a 100-gram gold bar of either 99.5%, 99.9%, or 99.99% gold purity; a 1-kg silver bar; and a 900-oz silver bar, as well as gold and silver grain specifications.
There are currently five precious metals refiners listed on the Active UAE Good Delivery List for Gold, two of which are located in Dubai, namely Al Etihad and SAM Precious Metals. The other three Active refiner members are Valcambi of Switzerland, Turkish refiner Ahlatci, and the Perth Mint of Australia.
In parallel with the UAE Good Delivery standard, the UAE Ministry of Economy has introduced risk-based due diligence regulations for responsible sourcing of gold. These regulations aim to identify and minimize risks in importing gold from conflict and other high-risk areas, and are based on OECD/FATF due diligence guidelines on responsible supply chains of minerals, and are mandatory for all gold refineries operating in the UAE, and not just UAEGD-accredited refineries.
DMCC in conjunction with the World Gold Council, the UAE Bullion Market Committee, and UAE banks, is also spearheading a new effort to introduce responsible sourcing in the entire UAE gold supply chain, with all other gold sector companies in the UAE encouraged to participate.
Given the UAE’s location and the huge flows of gold into the UAE gold market from surrounding regions, the aim of these gold supply chain due diligence regulations, says the UAE Ministry of Economy, is to ensure best practice international standards to the governance of the UAE gold trade, so as to enhance the UAE’s image and position as a global gold hub.
And to address some of the concerns around hand-carry gold coming into Dubai from some African countries, a pioneering and collaborative new project between DMCC and the World Gold Council, aims to create policy recommendations on types of gold and limits that can be hand-carried through Dubai.
UAE Gold Imports and Exports
According to DMCC, between 20 and 30% of all gold traded globally each year passes through Dubai, putting Dubai among the world’s top three gold trading hubs alongside Switzerland and London. Being one of the world’s largest gold transit hubs means that the UAE is therefore naturally one of the world’s largest importers and exporters of gold, with most of the gold imported into the UAE processed and refined further, before being re-exported to other countries.
However, the emergence of UAE/Dubai as one of the world’s largest importers and exporters of gold has happened with astonishing rapidity. According to a 2020 report by the Carnegie Endowment for International Peace: “As late as 1996, the UAE did not even appear among the world’s top one hundred gold-importing countries. Two decades later [in 2018], the UAE ranked among the top four, above Hong Kong and the United States.” These top four gold-importing countries that Carnegie refers to were, for 2018, Switzerland, China, India, and the UAE.
DMCC says that Dubai now accounts for 25% of worldwide trade in physical gold, “the majority of which flows through DMCC”. Likewise, the UAE’s Minister of Economy said in 2020 that the UAE “accounts for 11 percent of total global gold exports”.
According to the Observatory of Economic Complexity (OEC), in 2022 gold was the UAE’s largest import category and third largest export category behind crude petroleum and refined petroleum. This made the UAE the world’s third largest gold exporter in 2022, says the OCE, behind only Switzerland and the US and slightly ahead of the UK. At the same time, in 2022, the UAE was the world’s third largest gold importer, behind only Switzerland and China and ahead of the UK and India.
In 2022, the five largest destinations for gold exports from the UAE were Switzerland (25.3%), Hong Kong (18.1%), Türkiye (10.4%), India (9.8%), and Kuwait (8.0%). Together these five countries represented more than 70% of UAE gold exports. This makes the UAE a distribution hub for all other GCC gold markets, particularly Kuwait and Saudi Arabia, but also Bahrain, Qatar, and Oman, with the Dubai gold market supplying the other five GCC member markets with gold jewellery and bullion.
UAE Gold Exports by Country, in USD bn, 2022
Source: UN, Incrementum AG
On the gold import side, while the UAE imports gold from over 100 countries across the world, the leading source countries in 2022 were Mali (9.7%), Russia (9.4%), Ghana (8.3%), the UK (7.9%), and Zimbabwe (7.8%). From this list you can see that gold-producing African countries feature predominantly in UAE gold imports, with Dubai also importing smaller amounts of gold from non-goldproducing countries, i.e. the UK and Switzerland. Latin American countries such as Peru, Brazil and Columbia also feature further down the list as smaller gold suppliers to the UAE.
UAE Gold Imports by Country, in USD bn, 2022
Source: UN, Incrementum AG
More recently, Russia became the UAE’s biggest supplier of gold, which was a direct result of G7 sanctions against Russia, with the UAE importing 96.4 tonnes of gold from Russia in 2022, according to Bloomberg based on UN Comtrade data. In 2021, imports from Russia accounted for only 0.2% of UAE’s imports. However, these Russian gold flows to the UAE were short lived due to a tightening of controls in the UAE, which led to Russian gold exports being rerouted more and more to Hong Kong during 2023. According to Bloomberg, Hong Kong then became the biggest destination for Russian gold, importing 68 tonnes in 2023.
Overall, the UAE is the leading destination for African gold. One of the reasons for this is that the UAE has developed strong trade relationships and trade agreements with many African nations. Important African trading partners for the UAE include Kenya, Nigeria, South Africa, Tanzania, Angola and Ethiopia. In 2020 the UAE was among the top importers of goods and commodities from ten African countries.
In the gold sector specifically, Dubai and DMCC actively corroborate with African mining countries and their governments to encourage these countries to export their gold to market via Dubai. For example, DMCC runs the Africa Dubai Precious Metals Forum (ADPMF), which was staged in Ghana in 2015, 2016, and 2022. Ghana is an important gold trading hub for the Economic Community of West African States (ECOWAS). According to ADPMF, its aim is to create “stronger relationships between government, miners and traders in the African continent and industry stakeholders in Dubai”.
UAE-India Comprehensive Economic Partnership Agreement (CEPA)
The introduction of a Comprehensive Economic Partnership Agreement (CEPA) between the UAE and India in May 2022 has been a major positive for the UAE gold market. While it is a broad-ranging free-trade and tariff-reduction bilateral agreement, as regards the gold market, the UAE-India CEPA is mutually beneficial for the UAE and Indian gold sectors, with the UAE fully removing a 5% import duty on all Indian gold jewellery, in exchange for India reducing by 1% the import duty on gold being imported from the UAE into India.
The UAE is India’s third largest trade partner, with gold, gold jewellery and gems being the second most traded commodity between India and the UAE after oil. India has some of the highest gold import duties in the world at 15%, and the CEPA reduces this tariff by 1% to 14%. For gold imports from the UAE into India, this 1% import duty discount was phased in in 2022, starting with 120 tonnes of gold imports in the first year and then increasing by 20 t each year for 5 years up to 200 t in 2026. The eligible gold covered under the CEPA is “certified UAE/India Good Delivery gold bars in different denominations”.
With India being the world’s second largest gold importer – officially importing about 800 t of gold per year – and second largest gold-consuming country behind China, this means that the UAE will now supply a guaranteed 25% of these Indian gold imports, and that the UAE will become as important as Switzerland in satisfying India’s insatiable appetite for gold. This will in turn will provide guaranteed activity and growth for Dubai’s gold ecosystem in the areas of gold sourcing, gold trading, logistics, and refining.
The large Indian gold jewellery companies operating in both Dubai and India are the main importers of gold into India under the CEPA, and gold can also be imported directly into the vaults of the India International Bullion Exchange (IIBX) in the GIFT International Financial Services Centre (IFSC) located in Gandhinagar near Ahmedabad. The first export transaction of UAE Good Delivery Standard gold to India under the CEPA was processed in Dezember 2022, when 100 kgs of gold from Emirates Gold Refinery was shipped to IIBX.
Judging that CEPA’s gold import quotas were fully used up in both 2022 and 2023 with 120 tonnes and 140 tonnes of gold, respectively, CEPA has so far been a success for both countries. Indeed, DMCC thinks the Indian market is so important that in May 2023 it announced the opening of a DMCC representative office in Mumbai “to boost UAE-India relations”.
The UAE in BRICS+
The UAE’s economic growth potential has also been boosted by the country’s becoming an official member of BRICS+ in early 2024. The UAE joins fellow Egypt, Iran, and Ethiopia alongside existing founding BRICS members, Brazil, Russia, India, China, and South Africa, with neighboring Saudia Arabia still considering whether to accept the invitation to join the alliance. BRICS+ is also set to expand even further, with South Africa’s foreign minister saying that another 34 countries have expressed written interest to BRICS+ chair Russia in joining the organization.
With a combined population of 3.6 billion, i.e. 45% of the world’s population, and a combined GDP of USD 26trn, this extended BRICS+ grouping is also now a force in the global gold sector.
BRICS+ Population and Gold Holdings, in Tonnes
Source: UN, IncrSource: World Bank, World Gold Council, Incrementum AG
*The World Gold Council does not publish data on Ethiopia’s gold reserves
**Iran holds gold reserves, but does not disclose them ementum AG
BRICS+ and gold
Membership of BRICS+ now confers a real opportunity for the UAE/Dubai to strengthen its position in the global physical gold market by increasing gold trade flows with other BRICS+ members, and making the UAE the de facto gold trading and transit hub for BRICS+.
In the process, this would increase gold imports into Dubai, increase gold volumes through the UAE’s gold refineries, expand gold export volumes, and could boost direct investment into Dubai’s gold sector by participants from BRICS+ nations. From the perspective of other BRICS+ members there are also synergies, as they too would benefit from having preferential access to a cost-effective and accessible gold hub at the crosswords of the world.
All five BRICS+ founding members are leaders in the global gold market. China is the world’s largest gold producer, Russia is second, with South Africa in the top ten and Brazil in the top fifteen. India is the world’s largest net importer of gold, China is second, and China and India are also the world’s two largest consumer gold markets. With Saudi Arabia looking to become a major gold mining country, the UAE could instantly benefit by negotiating gold refining deals for Saudi’s gold output.
The UAE already imports significant gold from South Africa, some gold from Brazil, and at times gold from Russia; but these flows, such as from Brazil and the rest of Latin America’s Mercosur, could be augmented and made more formal under the auspices of BRICS. While the UAE is a significant exporter of gold to India and to Hong Kong, membership in BRICS+ should provide the UAE with potential to expand market access to China and to export more gold directly to China, by integrating the Emirate’s logistics and supply chains into China’s Belt and Road Initiative (BRI) Initiative.
Interestingly, the UAE – and four other GCC countries – are already “Dialogue Partners” in the China-led Shanghai Cooperation Organization (SCO), whose members consist of four BRICS+ nations – China, India, Russia, and Iran – as well as Pakistan, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan.
Gold pricing and trading
As a leading OTC physical gold trading hub with a gold derivatives and spot exchange (DGCX), the UAE will find that its membership in BRICS now provides new opportunities to collaborate with China, Russia and India on physical gold trading and gold price discovery.
China operates the world’s largest physical gold exchange, the Shanghai Gold Exchange (SGE) and also trades gold future contracts on the Shanghai Futures Exchange (SHFE). India runs the recently established India International Bullion Exchange (IIBX). And Russia, via the Eurasian Economic Union (EAEU), plans a new spot gold pricing mechanism called the Moscow World Standard (MWS) and a new Moscow International Precious Metals Exchange.
Together, all of these physical gold trading exchanges and venues in the BRICS+ countries could collectively become more influential on a gold price discovery process which has been traditionally dominated by the LBMA London and COMEX trading venues.
Monetary gold
Perhaps most critically, the expansion of BRICS, an overwhelming majority of which are strategically important in the global gold market, signals that physical gold will play a future role in a new multilateral monetary and trading system, which will attempt to be more independent of the US dollar as reserve currency.
That’s why the majority of BRICS+ member countries are active buyers of gold for their monetary gold reserves. Yet, BRICS+ countries do not have a central procurement system for sourcing or transacting their gold holdings, unless they choose the traditional locations at the Bank of England, BIS, and Banque de France, all of which present sanctions risk to BRICS+ countries.
If the UAE positioned itself as the market hub for sourcing central bank gold for BRICS members, it would be a win-win for all parties involved, and independent of Western central bank surveillance and control.
The combined official central bank monetary gold reserves of the ten BRICS+ countries, i.e. including potential member Saudi Arabia, are a significant 6,150 tonnes; however the real figure is most likely much higher. This is because various BRICS+ country central banks, such as the PBoC, are widely believed to understate their gold holdings, while the Iranian central bank does not reveal its gold holdings at all.
Conclusion
The UAE, through Dubai, the City of Gold, is now one of the epicentres of the global gold market. While the rapid emergence of Dubai as a significant player in the gold world has been extraordinary, its continued ascent and strategic vision for continued growth are equally impressive.
From the immensity of the Dubai Gold Souk to the sheer scale of DMCC with its multitude of gold trading companies, gold refineries, and DGCX, Dubai’s gold ecosystem fires on many cylinders.
All of this is powered by vast flows of gold coming in from gold-producing countries and flowing out to gold-consuming countries. In some ways the Dubai gold market is like an orchestra, with the musicians being the gold refineries, gold traders, vaults, and security companies, and the UAE federal and Dubai governments conducting the symphony.
The federal government is also now playing a role in promoting responsible gold sourcing as well as reinforcing international connections for Dubai’s gold market, via trade agreements such as the UAE-India CEPA, and via the huge potential of the UAE now being a member of BRICS+, where it can have an impact on international gold dynamics.
With Saudi Arabia having made significant gold discoveries and now planning to become a global gold mining powerhouse as it makes the mineral sector the “third pillar” of the Saudi economy, this adds an intriguing golden layer that could provide yet further gold flows into the UAE from one of its nearest neighbors.
The importance of Dubai as a gold trading center has also been endorsed by the World Gold Council, which has recently opened a new office in Dubai’s DMCC as the Council’s regional headquarters for the Middle East. This endorsement provides further evidence, if any evidence was needed, that Dubai and the UAE is now a formidably influential player in the global gold market.
The key takeaway with regard to Dubai, City of Gold, is therefore “watch this space” as the next chapter of Dubai’s golden journey unfolds.
[1] See chapter “Enter the Dragon: De-dollarization and the Eastern Push for Gold” in this In Gold We Trust report, as well as “De-Dollarization: The Final Showdown?,” In Gold We Trust report 2023
