Commercial banks are buying gold to meet the demand of clients who want theirdeposits saved in gold, commodity dealers said.
With the currencies in the GCC pegged to the volatile US dollar, local bankshave all the more reasons to buy gold, local gold dealers emphasised.
On the other hand, senior Dubai-based bankers affirmed they have beenconsidering meeting the demands of their customers to back the deposits withgold.
The dealers, however, declined to name the banks they have been supplyinggold to.
Michael Mesaric, CEO of Valcambi Sa, one of the largest gold refiners in theworld, said last year the company supplied 150 tonnes of gold to banks inSwitzerland. He said the commercial banks in GCC are buying gold, as well.
"Everyone is buying gold. Customers are demanding that their deposits be keptin gold," Mesaric told Emirates Business on the sidelines of the '7th Dubai Cityof Gold Conference'.
A Dubai-based banker said that banks have been open to the idea of buyinggold. "We may not disclose our holdings in gold, but then the bullion is animportant proposition for us. Especially with regards to holding the confidenceof customers," he said.
The director of investment banking of one of the prominent banks in Dubaisaid that his bank "will definitely look into buying gold".
Besides, there are reports of at least two banks in region – one in the UAEand the other in Saudi Arabia – launching a gold-backed fund for investors. SeidSuleman, President of Miraj, a Canada-based firm had earlier told this newspaperthat he was holding talks with banks to launch funds. "It will be basicallyabout 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 thecentral banks in the region –other than Saudi Arabia and Qatar – do not haveholdings in gold. The proportion of gold is quite small in the official centralbanks holdings of even these two countries.
Apparently besides banks, there are other institutions that have seen anincrease in gold volumes. The net long positions at Comex have increasedsix-fold since 2006 from about 50,000 contracts in October 2006 to about 275,000contracts in October 2009. The amount of gold under bullion backed exchangetraded 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.