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Ranya Rao Case: Dubai became the hub of gold trade but it also turned into the favourite destination of gold smugglers and money launderers who washed their dirty cash.
Dubai’s Gold Trade: A hub for investors & smugglers amid the Ranya Rao case. (Source: AFP)
Dubai’s Gold Rush: Dubai, popularly known as the “City of Gold”, has become one of the world’s biggest gold trading and investment hubs in the last 20 years.
Along with Dubai becoming a “gold hub”, the entire United Arab Emirates (UAE) has emerged as the second-biggest importer of gold by volume in the world, just behind India.
The Dubai Gold and Commodities Exchange (DGCX) and the city’s iconic gold souks stand as a testament to the power of gold in the global gold market.
The glimmer and lustre of Dubai indeed attracted millions of tourists from across the world, but it also turned out to be the favourite hub of gold smugglers and money launderers who washed their dirty cash.
Dubai has again come under the spotlight for being the den of gold smugglers with the Ranya Rao gold smuggling case in which the actor and daughter of a senior IPS officer was caught at Bengaluru’s Kempegowda International Airport (KIA) with 14.2kg gold bars strapped to her body when she was returning from Dubai on March 3.
How Dubai Turned Into The ‘City Of Gold’?
The iconic Dubai Gold Souk in Deira, which is the hub of retailers, investors and tourists, came into existence in the early 1900s.
In the beginning, it was established by some local jewellers at the banks of Dubai Creek. These jewellers were trading along the spice route.
The gold market mushroomed in the 1940s when Iranian and Indian entrepreneurs started setting up shops because of new trade policies, which favoured them.
However, the market boomed decades after the 1970s when the oil was discovered.
Today, the Gold Souk is one of the most iconic locations in Dubai. It hosts more than 300 retailers, investors and millions of tourists.
How Did The Dubai Government Nurture Gold Trade?
The government of Dubai has nurtured the gold trade in the city for years. Amongst the key initiatives taken are the launch of the DGCX in 2005 and the establishment of the Dubai Multi Commodities Centre (DMCC) in 2002.
Because of these initiatives of the Dubai government, a regulated and transparent environment was created for traders, which also boosted the confidence of the investor.
What Are Key Gold Trading Centres In Dubai?
Dubai Gold Souk
Dubai Gold Souk is one of the iconic gold markets which welcomes more than 300 retailers who sell gold jewellery, bullion, and coins to tourists and investors.
Dubai Multi Commodities Centre (DMCC)
The DMCC Free Zone drives the gold trade of Dubai. It has 15,000 businesses and all services related to gold refining, trading, and logistics are provided here. DMCC’s Almas Tower is a hub for gold and diamond traders.
Dubai Gold and Commodities Exchange (DGCX)
The DGCX is a platform to trade gold futures and derivatives. It offers risk management and price transparency tools.
The DGCX reported a trading volume of over 7.6 million contracts in 2022.
Gold Refining Facilities
Dubai has some of the largest gold refineries in the world, which include Emirates Gold and Kaloti Precious Metals. Through these facilities, the gold’s purity and quality are ensured before it gets traded in the emirate.
How Online Gold Trading Platforms Revolutionised Investment?
The gold trade value of Dubai went beyond $75 billion in 2022, which was nearly 11% of the global gold market.
The gold imports of the emirate remained at 559 metric tonnes while the exports touched 350 metric tonnes.
Amid the booming gold market, gold investment was revolutionised in Dubai by the introduction of digital platforms like DMCC Tradeflow.
With the introduction of digital platforms, retail investments in online gold trading platforms and gold ETFs saw a 25% growth in 2022.
Why Is Gold Cheaper In Dubai In Comparison To India?
Gold is cheaper in Dubai because no GST and goods tax is levied on gold in the city. On the other hand, there is a 3% GST on gold in India.
The world-class refineries of Dubai also ensure that gold is refined at a cheap manufacturing cost.
Gold has always remained exempted from taxes in Dubai. Because of this exclusion from taxes, the prices of gold in Dubai have always been lower. Along with GST, India levies other taxes on gold like customs.
In comparison to Dubai, the cost of gold is 15 to 20% higher in India. The lack of any world-class refining and storage facilities in India also pushes the prices of gold.
How Has UAE Become A Smuggling Hub?
With the passing of time, the UAE, especially Dubai, has established itself as one of the burgeoning marketplaces for the precious metal.
The refineries and Dubai Gold Souk have further expanded UAE’s position as one of the major gold hubs.
The lack of any local gold forces the UAE to import gold from various countries, and importers choose whatever way possible – legitimate or illegitimate.
In 2019, gold was the largest exported commodity of the UAE after oil with $17.7 billion worth of gold exported.
The importance of gold has continued to increase in Dubai amid dwindling oil reserves. This dominance of gold in the market of UAE further paved the way for dirty gold trade, money laundering and smuggling.
As per a report published by Swissaid, the UAE is the leading recipient of illicit gold which is smuggled from the African continent every year.
As per the report, 2,500 tonnes of gold smuggled from Africa reached the UAE between 2012 and 2022.
So, what’s making it easier for gold mafias to penetrate Dubai? The free zones of Dubai – which are the trade areas created to facilitate the easy establishment of companies by foreign investors – remain at the heart of the plans created by mafias.
No taxes and duties, policies allowing quick repatriation of profits and negligible bureaucratic red tape further help the gold mafias.
Speaking to Al Jazeera, former United States Federal Bureau of Investigation (FBI) investigator Karen Greenaway said, “Dubai was set up to be a financial capital. They have set themselves up to be in the middle of the gold trade, with lax laws and no enforcement.”
- Location :
Dubai, United Arab Emirates (UAE)