In Dubai, gold is being offered at heavy discounts after the Iran conflict halted flights, making it difficult for suppliers to move bullion out of the key trading centre.
Many buyers have pulled back from placing new orders, reluctant to bear the unusually high shipping and insurance costs without any assurance of timely delivery. As a result, traders – rather than continuing to pay storage and financing costs – are offering discounts of up to $30 per ounce compared with the global benchmark in London, according to people familiar with the matter who requested anonymity while discussing market details.
Many shipments were still stranded on Friday, sources said, although some bullion had begun to be loaded onto flights departing Dubai from the middle of the week.
The United Arab Emirates, particularly Dubai, is a major hub for refining and exporting bullion to buyers across Asia and also serves as a transit point for shipments from Switzerland, the UK, and several African countries. However, parts of its airspace have been closed after a wave of Iranian missile attacks, as the US–Israeli conflict with Tehran enters its seventh day with no clear end in sight.
Gold is usually transported in the cargo holds of passenger aircraft. However, with flights from the UAE heavily restricted, traders and logistics companies are hesitant to move high-value shipments overland to airports in countries such as Saudi Arabia and Oman, citing the risks and logistical challenges involved – especially when crossing land borders.
“Several cargo shipments have been delayed or stranded, creating short-term tightness in the availability of physical bullion in India,” said Renisha Chainani, head of research at Augmont Enterprises Ltd, one of India’s largest gold dealers.
However, buyers in India – one of the biggest consumers of gold shipped from Dubai – are in a position to wait, as near-term demand remains relatively subdued and inventories have increased following heavy imports in January, according to Chirag Sheth, principal consultant for South Asia at Metals Focus.
“As of now, there is sufficient stock,” he said. “However, if the situation continues for several months, it could lead to supply problems.”
Spot gold has risen by nearly 20% this year, holding above $5,000 an ounce, although trading has been volatile, and prices have faced pressure this week as the US dollar strengthened.
There are also indications that refiners are facing difficulties in sourcing doré, the semi-refined gold bars typically produced at mine sites. MMTC-PAMP, India’s largest precious metals refinery, sources about 10% of its doré from a Middle Eastern mine, but these supplies have been disrupted, according to Chief Executive Officer and Managing Director Samit Guha. He added that for new contracts sourced from other regions, logistics costs have increased by 60% to 70% since the conflict began.