Spotlight on the UAE
Chapter 1 - Introduction
- The Emirates has increasingly focussed on legislation to improve its governance across the gold market.
- The 2021 introduction of the UAEGD, albeit a voluntary code, has been augmented in July 2022 with an announcement concerning mandatory due diligence regulations.
- The increasing focus on CEPAs, which require adherence to various precious metal legislation, should see the UAE increasingly attract bullion imports, to help take advantage of these new agreements.
The United Arab Emirates (UAE) is a major international gold trading hub largely thanks to Dubai, one of the country’s seven Emirates. This has been the focal point for much of the UAE’s development in the gold market, especially over the past 10-15 years, which has resulted in a marked growth in physical gold trading. In this regard, two headline figures stand out, official gold jewellery exports, which in 2020 exceeded $6bn, and bullion imports which reached $29bn. It was arguably the creation of the Dubai Multi Commodities Centre (DMCC) in 2002, which helped to strengthen Dubai’s role as a key entrepôt in the Middle East. In 2020, the UAE accounted for around 10% of both total world gold bullion and the gold jewellery exports, making it the third largest in the world behind mainland China/Hong Kong and Switzerland.
The Emirates has long been home to a sizeable gold refining industry, but more recently the government has sought to strengthen its role in this market, with the launch of a Good Delivery system, known as the UAEGD. This appears to be quickly gaining prominence, not least in the context of two of the three Comprehensive Economic Partnership Agreements (CEPAs) that have been signed with India and Indonesia (the third being with Israel). Although details of the Indonesian CEPA are yet to be released, an important element of the UAE-India agreement is that the gold India imports, as part of the CEPA from the UAE, must be accredited under the UAEGD. As it stands, only two UAE gold refineries are UAEGD-certified (this being a voluntary standard), but as the government expands the CEPA programme this will most likely see the accreditation system grow, both for gold and silver.
While adherence to the UAEGD is voluntary, the government’s late July announcement looks to build on the Good Delivery system and may well reflect the increasingly high-profile nature of its gold industry as more CEPAs are signed. This new legislation, the Due Diligence Regulations for Responsible Sourcing of Gold, will be effective from January 2023. One important difference with the UAEGD is that the responsible sourcing will be mandatory. To this end, it will be interesting to see in the coming years what impact this has on the UAE’s gold imports.