Indian gold traders trying to escape a doubling of import duty in India are driving the business of Dubai based vaults, CEOs of Dubai Multi Commodity Centre (DMCC) registered brokerage companies say. Indians traders who earlier imported gold from Dubai, converted it into various forms of jewellery and exported to destinations in East Asia, South East Asia, Europe and North America are now directly exporting it from Dubai, they added.

A Dubai good delivery certificate also adds to the value of gold exported from Dubai as compared to that from India and this adds to the list that is making the Indian traders prefer to keep their gold in Dubai.

The trend in Dubai, the largest re-exporter of gold in the world comes as a result of a recent hike in duty on gold in India – the largest importer of gold in the world. Indian Finance Minister Pranab Mukherjee doubled the duty on every 10 gm of gold from Rs100 (7.63) to Rs200 in the budget he presented on July 6 this year.

The increased figure finally comes down to about $12 an ounce an amount the bulk importers of gold in India are trying to escape.

"Not only are Indian traders trying to evade international duties but also domestic ones. A trader in India is directly importing gold to his state in India instead of transporting it within India," said Jeffrey Rhodes the CEO of Dubai-based INTL Commodities DMCC. Traders in India transferring gold from one state to another have to pay duties and taxes imposed by each state. The amount accumulates into a big amount for bulk traders and therefore it is those traders who import high volumes of the bullion are storing gold in Dubai, Rhodes said.

In what confirms the trend is the latest figure of gold import and export released by the DMCC. While import of gold increased in the second quarter, exports decreased suggesting that much of the gold is being stored in Dubai vaults. While Dubai imported 140 tonnes of gold in the first quarter and exported 116 tonnes, it imported 160 tonnes of gold in the second quarter and exported only 97 tonnes.

The trend has also boosted the figures of gold re-export from Dubai, a trade that the DMCC is trying to promote. DMCC said earlier that gold trade through Dubai reached $14.69 billion (Dh54bn) in the first half of 2009, an increase of 12 per cent from $13.07bn during the same period in 2008.

In the first six months of 2009, 300 tonnes of gold was imported into Dubai, an increase of 13 per cent compared to 265 tonnes in the same period of 2008. In the first half of 2009, gold exports from Dubai reached 213 tonnes, up 19 per cent from 179 tonnes in 2008. Gold price averaged $922 during the first half of 2009.

"Indian traders are basically using Dubai-based vaults for re-export. It saves a lot of time and alsp it earns Dubai good delivery certificate, " said Sajith Kumar PK, the Director and CEO of JRG International Brokerage DMCC.

Vikas Gupta a New Delhi based jewellery dealer told Emirates Business that he is looking forward to turning jewellery from bullion bars in Dubai instead of his workshop in Noida – a satellite town of New Delhi. 

Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here.