posted on 05/05/2010: 1000 views
Commercial banks are buying gold to meet the demand of clients who want their deposits saved in gold, commodity dealers said.
With the currencies in the GCC pegged to the volatile US dollar, local banks have all the more reasons to buy gold, local gold dealers emphasised.
On the other hand, senior Dubai-based bankers affirmed they have been considering meeting the demands of their customers to back the deposits with gold.
The dealers, however, declined to name the banks they have been supplying gold to.
Michael Mesaric, CEO of Valcambi Sa, one of the largest gold refiners in the world, said last year the company supplied 150 tonnes of gold to banks in Switzerland. He said the commercial banks in GCC are buying gold, as well.
"Everyone is buying gold. Customers are demanding that their deposits be kept in gold," Mesaric told Emirates Business on the sidelines of the '7th Dubai City of Gold Conference'.
A Dubai-based banker said that banks have been open to the idea of buying gold. "We may not disclose our holdings in gold, but then the bullion is an important proposition for us. Especially with regards to holding the confidence of customers," he said.
The director of investment banking of one of the prominent banks in Dubai said that his bank "will definitely look into buying gold".
Besides, there are reports of at least two banks in region – one in the UAE and the other in Saudi Arabia – launching a gold-backed fund for investors. Seid Suleman, President of Miraj, a Canada-based firm had earlier told this newspaper that he was holding talks with banks to launch funds. "It will be basically about managing gold-backed individual portfolios," he said.
The trend contrasts with the central bank holdings of gold in the GCC. Repeated reports from the World Gold Council (WGC) have pointed out that the central banks in the region –other than Saudi Arabia and Qatar – do not have holdings in gold. The proportion of gold is quite small in the official central banks holdings of even these two countries.
Apparently besides banks, there are other institutions that have seen an increase in gold volumes. The net long positions at Comex have increased six-fold since 2006 from about 50,000 contracts in October 2006 to about 275,000 contracts in October 2009. The amount of gold under bullion backed exchange traded funds has risen from 500 tonnes at end-2006 to 2,250 tonnes at end-2009. Also there are reports of SWFs been invested into gold ETFs. - Emirates Business 24|7
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