While gold jewelry sales in Dubai and other parts of the Middle East sputtered in 2008 due to rising gold prices, in 2009 the Middle East, and in particular the Gulf region, is on its way to becoming a hotspot of gold investments. Gold investment in the region grew by 38% in 2008. Saudi Arabia saw the biggest increase, with a 300 percent increase in investment demand. The Middle East has been a large consumer of gold, but today's falling real estate prices and stock markets are heating up this "natural" tendency of the Middle East to revert to the real physical money that is still fresh in their collective memory.
Dubai "The City of Gold", has long been known as the center of the gold trade in the Middle East. It is home to the DGCX, the Dubai Gold and Commodities Exchage, that deals in gold futures contracts in 1 kilogram units. According to the Dubai Multi Commodities Centre (DMCC), the value of the gold trade in Dubai reached US$29 billion in 2008, a 53% increase over the previous year. This upward trend is expected to continue.
In anticipation of this upswing in gold investment, investment in the precious metals industry has been building. An Italian corporation Elettronica SPA and Khalid Ahmed Al Mansoor recently announced plans to build a refinery for both gold and silver, to produce bullion bars and grains of precious metals. It will be the largest dual refinery in the Middle East.
In addition to the new gold and silver refinery, the World Gold Council is planning to launch a new ETF (exchange traded fund) based in Dubai, aimed at Middle Eastern investors. The gold ETF would follow Islamic laws, which prohibit certain financial activities such as receiving interest on investments, making it vastly marketable across the entire region. This ETF has been planned for some time, but the recent financial storm has mage the WGC speed up its preparations so that the ETF will be online soon enough to meet the coming demand in the Middle Eastern precious metal gold market.
While Dubai itself produces no gold, it is in the process of becoming the main manufacturing and refining center of the region.
Reference: Commodity Online