UAE’s gold trade moves closer to ‘responsible sourcing’
This would cut down or remove non-certified bullion in the market
Dubai: More businesses in Dubai’s gold and jewellery trade are likely to sign up for a certification that confirms the bullion used by them are “responsibly sourced”. The certification process is entirely voluntary, but industry sources believe doing so is the need of the hour and in keeping with Dubai’s “City of Gold” status.
What this means is that each entity in the local business of gold and jewellery - retailers, wholesalers, bullion dealers and refining factory operators - need to ensure the gold they buy and use are from certified and traceable sources. This way, the practice of trading in non-certified gold coming from unknown sources will be curbed, if not cut entirely.
In particular, proper certification would help crack down on supplies coming from “informal mining” activities, particularly in Africa.
None of this will in any way impact the local gold shopper - what will change is the addition of another certification process within the gold trade.
Responsible/ethical sourcing has become a live issue in the jewellery industry worldwide in recent times, and follows a similar track followed by the diamond trade through the “Kimberley Process”. The UAE adheres to the KP requirements, among which one of the key requirements is that no one should deal in diamonds mined from the world’s conflict zones.
“So far, individual businesses in the local gold trade have signed up to this “responsible jewellery sourcing” requirements,” said Abdul Salam K.P., a member of Dubai Gold and Jewellery Group and Executive Director at Malabar Gold & Diamonds. “More will follow, and the DMCC (Dubai Multi Commodities Centre) is the entity overseeing the process for gold refiners.”
One of the main requirements is that everyone in the business needs to clear a two-step process on each purchase. The gold sold should be traceable to “two suppliers who dealt in it previously”. “If you cannot identify this, the deal should not go ahead,” said Salam.
Industry sources point out gold coming in from “informal mining sources” is not a problem at the retailer level. “Instead, it’s something that refiners everywhere need to guard against,” said Cyriac Varghese, General Manager at Sky Jewellery. “Non-certified gold could come in the form of granules straight to refiner factories, escaping duties. The factories could buy these granules at a discount, refine and convert them into bars.
“Retailers don’t take raw gold, so the process would work best at the refiner level more than anything else. But from an industry perspective, if all those in the business sign up for this certification, it will create more transparency across the board.”
So far, the DMCC has been engaged in educating the trade on ethical sourcing and how to ensure a business can conform to best practices. According to Salam, the process could be tightened up further, if needed, by excluding businesses who do not conform from dealing in government tenders, etc.
“But this is still voluntary - but if key global markets for gold were to go in that direction, everyone else will follow,” Salam added. “As far as the trade can make out, the presence of non-ethically sourced bullion in the local market is marginal, irrespective of what some international media reports say.
“All of the leading retailers buy their needs from bullion banks, global names at that, and they have strict enforcement standards already in place. In Malabar’s case, more than 80 per cent of the gold we use is from bullion banks and the rest through recycled gold brought in by the shoppers.”
A question of costs
Going through an audit to be a “responsibly sourcing” business dealing in gold is the easy part… the cost involved is what could put off more entities from signing up.
“The cost involved is the only concern,” said Abdul Salam K.P. of Malabar Gold & Diamonds. “It is set as a percentage of the turnover - but in a mass market such as the UAE or India, that can prove quite a burden for the retailer. Especially so when demand for gold is on the slow side.
“Malabar Gold hasn’t signed up so so far… we are still negotiating the terms.”
The Dubai Gold and Jewellery Group has about 400 members and whose retailers operate 1,000 or so shops in the emirate. These represent nearly 70 per cent of the overall gold trade - retail and wholesale - in the UAE.
Digging needn’t be the only way to get a diamond
Dubai will next week host the first tender for rough laboratory-grown diamonds, at the Dubai Diamond Exchange.
Taking place over three days from May 11, the tender is organised and managed by Tony’s Auction World, diamond traders based in Hong Kong. The stones - created using the “chemical vapour deposition” process - together make up 55,000 carats.
According to Rushabh Mehta, CEO of Tony’s Auction World, “Lab-grown diamonds offer a different value proposition to natural diamonds and trading them in a regulated and open platform increases the transparency and legitimacy of the sales process. This is a major milestone and testament to both the growing prominence of lab-grown diamonds and their increasing market appeal.”