Middle East scrap gold volumes to surge

Scrap gold volumes are expected to grow in the Middle East due to consumers booking profits as the yellow metal hovers near all-time highs, an executive said on Monday.

'We have noticed a big increase in scrap gold coming in from India and Pakistan, because of the high price of gold more people are selling to make a profit at this point,' said Mohamed Shakrachi, managing director of Dubai-based Emirates Gold, one of the largest gold refineries in the Middle East.

Gold prices were slightly lower at $1,052.52 on Sunday within sight of a record of $1,061.20 set on October 8.

Bullion has gained as much as 21 per cent this year on fund buying driven by uncertainties in the dollar's outlook.

Last year Emirates Gold processed around 250 tonnes of gold of which 200 tonnes was scrap metal, this year Shakrachi expects volumes to increase even more.

'With a weak rupee, I'm expecting India and Pakistan scrap will really flood the Middle East this year, everyone seems to be selling their old jewellery these days,' he said, declining to give a specific percentage increase on the scrap volumes.

'There was one day last week when we received 1.5 tonnes of scrap gold from India and Pakistan and I see that the trend will continue given the high investor demand.'

During the first quarter of the year distress sales from cash-strapped consumers hit by the economic crisis have also caused scrap volumes in the Middle East to reach record highs of around 500 tonnes compared with around 300 tonnes for whole of 2008.

'The flood of scrap will continue because for now the high investor demand for gold is keeping prices really high and this is the prefect time for consumers to make money by selling their personal gold items,' said Pradeep Unni, senior gold analyst and trader at Richcomm Global Services.

The price of scrap gold is usually 1-2 per cent lower than the market price of gold jewellery, Unni said.

Branded as the City of Gold, Dubai's retail gold sales have been hard hit by the economic crisis which caused sale volumes to drop by as much as 40 per cent last month.

Retailers believe that sales will only recover if the price of gold drops under the $1000 level.