Gold is one of the most valuable commodities in the world. As one of the most sought-after physical commodities, it is considered to be a financial refuge in economic crisis by traders. It can be traded through ETFs and even cryptocurrency, and throughout the ages, gold has been the epitome of investment.
But the allure of all that glitters may not be so golden, as its history shines a light on the questionable extraction methods and dealings. Today, a reflection of such views is why the United Arab Emirates, a global gold trading hub, faces concerns and backlash from the London Bullion Market Association (LBMA).
Understanding the Growing Concerns Between The LBMA and UAE
The problem ignited over a year ago when an investigation by Reuters disclosed that the UAE took in gold worth billions that had been smuggled out of African countries of conflict with unregulated mining conditions.
In response, the LBMA (London Bullion Market Association), the most dominant gold market authority, issued that it would ban countries and stop refiners with certifications from sourcing gold from countries without regulations. It just so happens that the UAE was purchasing a significant amount of this gold.
In response, the UAE hit back quite harshly against the legitimacy of the LBMA practices over the gold market. Furthermore, the UAE is to establish its own gold standard in the form of the ‘Dubai Good Delivery system’ (DMCC) for the market. This will ensure for the UAE that all gold refineries are monitored and that there is transparency.
A Deeper Look into the Situation with Swiss Authorities
Switzerland, another nation with 4 of the most prominent global gold refiners, also issued strict warnings against UAE. One organization, the Swiss State Secretariat for Economic Affairs (SECO), asked gold refineries to increase inspections and regulations on gold imports from the UAE. SECO has explicitly issued a warning to Swiss gold refiners to be aware of the country of origin of the gold they are buying, implying that the UAE was supplying illegally sourced bullion.
The UAE retorted that they already applied OECD (Organization for Economic Co-operation and Development) regulations on mineral sourcing. There are reports that state that a good quantity of Africa’s illegally mined gold is either exported or flown to Dubai via refineries in countries like Uganda or Congo. At the same time, gold sent through hand luggage with falsified paperwork enters the UAE and is melted down to hide the source by being turned into jewellery or gold bars.
Final Thoughts
Such problematic scenarios have forced the gold market authority LBMA and even SECO to put pressure on certain countries like the UAE. This in turn has hampered Dubai’s chance of penetrating the mainstream gold market unless they meet regulation standards.
The only way to reduce rising tension and expand its position as a top gold market hub is to launch the Dubai Good Delivery Standard for its gold market. Despite growing concerns and mounting pressure, the UAE seems committed to proving itself true in the face of unwavering critics from gold market authorities.
