It looks like our NY cartel friends are on the verge of being pecked to death by free market forces. Once the physical supplies dry up and/or prices spike beyond the reach of most investors, there will be mad dash for gold and silver miners.

Regards - VHF

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Institutional buyers jump into Dubai gold market

September 25, 2010

LONDON (Commodity Online): Now, financial institutions are making waves in the gold market in Dubai.

According to news reports, gold has started attracting physical orders from financial institutions within the local market. These are meant either as an investment choice for the institutions themselves or for their clients.

The growing trend is unprecedented, industry observers said, as such orders have in the past usually been placed through the major commodity and financial markets of London and Geneva.

These are very much early days for local physical order placements and primarily for between 10 to 30kg (per order), not the heavier tonnages, a trader told the Gulf News.

On such order sizes, there are certain cost benefits that sourcing from here can create for a local institution, more so in the present high price environment for gold.

Gold prices have risen by more than 15 per cent this year. Gold is the only investment that is a true asset which can neither be printed nor be created, said an analyst. There are no details whether individual banks are investing in physical gold as part of their portfolios, but it’s certain that central banks are becoming more and more uncomfortable about selling their gold reserves. The gains made by gold on the investment side have gone some way to compensating for the lacklustre performance in the local gold jewellery retail industry through the first three quarters.

Gold’s prominence as an investment commodity is mirrored in the higher interest being generated for bars, kilo bars, ingots, coins, etc, at the expense of jewellery. Going forward, if prices retain the same trajectory, the momentum for gold as an investment will only continue.

A similar trend is being witnessed in demand coming from India, which Dubai’s gold trade has historically served. Rather than jewellery, orders from India for gold as an investment are clearly discernible since the start of the year.

With the US dollar continuing to weaken, gold has little work to do other than to head higher to compensate for the dollar’s slide.

Most of the focus has been on the extreme dollar weakness and possible impact on the currency as the market encounters weaker economic data.