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DMCC
GOLD BULLETIN
Issue 2.9, September 2013
Dear Reader,
It was great to see so many of you in Rome last month at the LBMA conference. The record attendance of over 700
delegates made this a great opportunity to catch up with industry colleagues and gauge the mood of the market. In
case there were any doubts, Rome decisively settled on ‘Regulation’ as the theme of 2013 for the gold industry. As
the head of a bullion bank told me: “I remember the days we used to have four traders for every compliance officer,
now we need four officers for every trader!” Whether it is Dodd-Frank, EMIR, OECD or the 80-20 rule in India,
regulators across the globe are tightening up the trade of what has increasingly become more of a financial asset
rather than a commodity: gold.
Sincerely,
Franco Bosoni
Director, DMCC Commodity Services
Gold Price Movement (September, 2013)
(US$ per Oz)
The average gold price for September 2013 was US$
1,348; a 0.3% increase from the previous month and
23% less than the same period last year. The price of
gold has hovered around the US$ 1,300 mark and has
failed to break through into US$ 1,400. A number of
political and economic debates in the US legislature
have made it next to impossible to predict the future of
the price of gold.
Gerhard Schubert, Head of Commodities, Emirates
NBD, said, “The gold market appears to be extremely
sensitive about all speeches, murmurs and rumours
about the beginning of tapering the stimulus
programme. It is going to happen, maybe at the
upcoming FOMC meeting on 29 and 30 October, but
most likely in the FOMC December meeting.”
Gold price vs US debt ceiling
The price of gold has reacted every time the US
Federal Reserve convened to discuss the economic
state of the country. This month the Fed discussed the
issue of putting an end to - or tapering off - its US$ 85
billion bond program and the possibility of increasing
the debt ceiling. The two factors have been playing a
major role in the price performance of gold.
On Oct. 1, Evan Lucas, market strategists with IG in
Melbourne said, “The more and more we lurch towards
October 17 and with no sort of deal being done with the
debt ceiling, the stronger it [gold] is going to get.” In
addition, he also expects gold prices to reach $1,400/oz
if the uncertainty continues in the US.
Source: LBMA
Zane Lim, regional manager at Singapore's premier bullion
dealer (BullionStar), said, “Many smaller investors are still
‘sitting on the fence,’ but the longer the U.S. budget talks
drag on, the more likely they are to put their money on
gold.” Source; WSJ.com
In a recent survey conducted by Bloomberg, Goldman
Sachs, Citigroup and Morgan Stanley have predicted that
the gold price will start to fall again in Q1, 2014. Barclays
has also said the Fed’s decision on tapering was only
‘deferred’ and bullion may average US$1,270 by the end of
2014. Source: Bloomberg.com
Issue 2.9, September 2013
DMCC Gold Bulletin
Gold is still a ‘must have’ commodity
Gerhard Schubert said, “Gold is currently in no-man’s land and
there appears to be no need for fresh buying, unless the market is
able to break the major resistance level at US $ 1,425 … However,
we still recommend that gold should represent between 2% and
5% within a prudently managed investment portfolio, due to its
mostly negative correlation with other asset classes.”
India’s Jewellery import duty increases
to 15%
Over the past 18 months, there have been a number of
measures passed by the Indian government to curb its
current account deficit (CAD). Despite the measures, the
country is still facing a record high CAD of 6.7% of its
GDP. Since the Reserve Bank of India (RBI) introduced
the 80:20 rule on the import of gold bars (20% of gold
bars imported is for jewellery re-export and 80% is for the
domestic market), traders have been exploring the
possibility of importing gold jewellery from neighbouring
trading hubs. In an attempt to avoid the 80:20 rule,
traders started importing more jewellery, which could be
used as an investment and/or refined and used to design
jewellery. The government closed this loophole by
increasing import duty to 15% on gold jewellery, which is
higher than the bullion imports duty (10%).
The Indian finance ministry issued a statement saying,
“Jewellery making is a labour intensive industry, millions
of artisans are dependent on this sector for their
livelihood…there is an apprehension that Indian jewellery
makers would not be able to compete with cheaper
imports, particularly when majority of the imported
jewellery is machine-made as compared to handmade
jewellery in India.” Source ibtimes.com
"This is a good move for the local industry and it will
support the manufacturing sector," said Haresh Soni,
Chairman of the All India Gems and Jewellery Trade
Federation.
Major reasons for increasing the import duty

Closing the loophole: restricting the import trade of
gold jewellery

Protecting the domestic industry: most of the jewellery
imported is cheaper because it is machine-made (1%
of gold value), incurring little to no labour cost in
comparison to the Indian handmade jewellery (at 510% of gold value). The lower prices of the imported
gold were affecting the local jewellery makers
business
An official statement from the government said, “To
protect the interests of small artisans, the customs duty
on articles of jewellery and of goldsmiths’ or silversmiths’
wares and parts thereof is being increased from 10% to
15%.” In addition the finance ministry mentioned that
jewellery making was a labour-intensive industry, with
millions of artisans dependent on this sector for their
livelihood.
Sudheesh Nambiath, India Analyst at GFMS Thomson
Reuters, said: “After the duty on gold was increased to
10% and with new import norms in place, it made sense
to import jewellery to meet at least partial requirement,
as this was free of hassles. However, duty on jewellery
at 15% has killed the benefit that existed.”
Gold premium dips by 82% ahead of
the Indian festive season
Ahead of the festive season, there is some good news
for Indian consumers. Premium on gold has declined in
India by almost 82% to US$ 7 per ounce from as high
as US$ 40 per ounce as imports have resumed after a
gap of two months.
Confirming the development, Pankaj Parekh, ViceChairman of Gem & Jewellery Export Promotion
Council, said: "The customs authority has cleared gold
consignments of banks last week. The Kolkata-based
exporters have received gold from these consignments.
In fact, I have personally exported 100kg of jewellery
after receiving gold last week."
Haresh Soni, Chairman, All India Gem & Jewellery
Trade Federation said, "We had a round of talks with
the RBI last week too, where officials from Nova Scotia
Bank whose consignments had been held up at the
customs, were also present. We are hoping that imports
will resume before Navratri (Indian festival). Demand
generally starts from Navratri period and continues till
December - January. November-January is the wedding
season in India when lot of purchases take place."
Imports of the yellow metal will also boost exports,
which had fallen by 68% between April-August when
compared to the same period last year. Exports usually
total only approximately 60-70 tonnes per year and
compete for the Middle East and the United States
market. A drop in premium will help prices to ease a bit.
Source: economictimes.indiatimes.com
Issue 2.9, September 2013
DMCC Gold Bulletin
Market Update
Emirates Gold - The first UAE refinery to
pass the DMCC Responsible Sourcing
Audit
Emirates Gold is the first UAE refinery to pass the
DMCC Responsible Sourcing Audit. The audit
concluded that Emirates Gold has complied with each of
the five steps of the Dubai Multi Commodities Centre’s
(DMCC) Practical Guidance for Market Participants in
the Gold and Precious Metals Industry – establishing
supply chain management system, identifying and
assessing risk, developing and implementing risk
mitigation, carrying out an independent third party audit,
and reporting annually – for the period from 1 June 2012
to 31 December 2012.
Mohamad Shakarchi, CEO and Founder, Emirates Gold,
said, “We are thrilled to position ourselves as a leader in
the region and globally, on the subject of responsible
gold. Dealers of Emirates Gold branded bars can draw
comfort from this result. Responsible sourcing is our
contribution to address and mitigate the various
associated issues. On the one hand, this will create
more transparency in the system, and on the other
hand, producers of jewellery or electronic devices can
feel more comfortable with the origin of their material.
At present, Emirates Gold, has a refining capacity of up
to 200 tonnes per year. It sells its products to
international bullion traders, major retailers and jewellers
locally, and in Europe and Asia to wholesalers who then
distribute the bars in their respective countries or sell
them online. For more information on Emirates gold visit
their website: www.emiratesgold.ae
GJEPC and Signet Jewellers recognise
responsible sourcing standards adhered to
by DMCC’s Dubai Good Delivery (DGD)
refineries
The Gem and Jewellery Council of India (GJEPC)
supports the inclusion of imports of gold from Dubai
Good Delivery Standard (DGD) compliant refiners into
India. Simultaneously, Signet Jewellers Ltd. (Signet)
confirmed that based on independent evaluation, the
DGD standard is compliant with the Signet Responsible
Sourcing Protocol (SRSP) for gold. Signet is the largest
speciality retail jeweller in the USA and the UK. These
recognitions will allow manufacturers in India to accept
gold from refineries on the DGD list, as well as reassuring others in the supply chain that gold from DGD
refineries is responsibly sourced. DGD refineries are all
required to adhere to DMCC’s Practical Sourcing
Guidance and Review Protocols (‘Guidance’).
Gautam Sashittal, Chief Operating Officer, DMCC, said:
Almas Tower Level 2
PO Box: 48800 Dubai U.A.E
“The DMCC Practical Guidance and Review Protocol
ensures that the DGD benchmark sets the highest global
standards in responsibly sourcing minerals. Signet
Jewellers’ confirmation of our alignment with their own
guidelines and the support of the GJEPC of India of the
inclusion of gold from DGD refineries are further
testimony of the robustness of our approach and
standards.”
Pankaj Parekh, Vice Chairman of the Gem and Jewellery
Export Promotion Council (GJEPC) of India, added:
“We are encouraged to know that the Dubai Good
Delivery Standard has been endorsed by Signet
Jewellers, confirming that DGD-accredited refineries are
in line with not only Signet’s benchmarks but international
best practice as well. With Signet being one of our most
significant clients, we are certain that this recognition will
have a positive impact on the gold market in India, in the
near future, in particular with regards to responsible
supply chain management.”
David Bouffard, Vice President, Corporate Affairs, Signet
Jewellers, commented:
“Signet holds itself and its suppliers to the highest social,
ethical and environmental principles and is very focused
on ensuring a responsible supply chain for the gold
industry.
After reviewing an independent assessment of DMCC’s
responsible sourcing guidelines, audit protocol and the
independent audit of DMCC’s processes versus those of
other international bodies engaged in determining
standards for responsible sourcing, we are pleased to
recognise that DGD-accredited refineries operate in
accordance to our protocol for gold.”
DMCC and Responsible Jewellery Council
Announce Cross-Recognition of their
Responsible Sourcing Audit Programmes
The Dubai Multi Commodities Centre (DMCC) and the
Responsible Jewellery Council (RJC) have agreed to
cross recognise their responsible sourcing audit
programmes. The mutual cross-recognition means:
-
RJC recognises that gold refineries that are accredited
by DMCC’s DGD standard and comply with DMCC's
responsible sourcing audit, will fulfil parts of Section 10
of the RJC Chain-of-Custody (‘CoC’) Standard
-
-
DMCC will accept RJC CoC Certified gold refineries
as demonstrating conformance with the DMCC
Practical Guidance and Review Protocol
Refiners will be able to save costs and reduce audit
fatigue
T. +971 4 433 67 11
F. +971 4 375 19 00
[email protected]
Issue 2.9, September 2013
DMCC Gold Bulletin
Interview with Philip Olden,
Independent consultant to Signet
Signet Jewelers Ltd. published the Signet Responsible Sourcing Protocols
(“SRSPs”) for gold and the 3Ts (tin, tungsten and tantalum) to provide guidance
to its suppliers to help ensure supplies of products containing these minerals
are conflict-free. Compliance to these protocols will enable Signet to comply
with U.S. law (known as the “Dodd-Frank” Act), and with likely future similar
legislation in Europe.
The SRSPs provide all companies through the supply chain, from refineries,
banks through to manufacturers of finished products with details of how to
make sure their products are conflict-free. It’s an open standard, available on
the Signet website, and Signet encourages its use throughout the industry.
We know that Signet Jewelers is the world's largest
specialty retail jeweller, but what else can you tell us
Signet’s sourcing of jewellery from the UAE, GCC and
Indian subcontinent?
Based on a recent independent evaluation, Signet
has confirmed that the DGD standard, more
particularly, the responsible sourcing provisions of
the stand, is compliant with the SRSP.
Like many other US and European companies, Signet
sources a large proportion of its jewellery from the
subcontinent, especially from India.
a. What is your take on this new development?
‘Responsible Sourcing’ is a hot topic in the industry
today. What is your take on this global issue and its
current framework?
Signet is very active in this area. We have been very
involved with the establishment of the guidance and
standards by the OECD and the Responsible Jewellery
Council, of which Signet is a certified founding member, as
well as the LBMA and DMCC. The alignment of guidance
and standards between these organisations has helped us
develop our protocols, especially for gold.
What actions has Signet taken to enforce and ensure
that manufacturers, jewellers and consumers in the
gold market are compliant with SRSP? What lessons
has Signet learnt?
It’s encouraging, as the independent report confirmed
that the DGD standard is consistent with the LBMA
standard, and this harmonisation of standards is
important for the industry to reduce costs and
fragmentation of different guidance and standards.
b. What does it mean for the gold market? And
more specifically for gold traded through Dubai?
It means that companies using gold from DGD certified
refineries can be sure that this gold is not contributing
to conflict, and that they can use it for supplies to Signet
and many other international customers. It means that a
very large proportion of refined gold in the world can
now be certified as conflict-free, which was not possible
even just a year ago.
c. How does this development affect your supply
chain?
Throughout 2013, we have asked all suppliers to report
progress towards compliance on a quarterly basis, through
a simple online compliance report on behalf of Signet. The
report asked suppliers to confirm the company’s
compliance with the SRSP, what criteria the suppliers are
using to make a statement of compliance, and what proof
suppliers will be able to provide to independent auditors. If
the company is not yet compliant, the survey asked
suppliers to confirm why, what action the company needs
to take, and when the supplier expects the company to
become compliant.
Its largest effect is on our suppliers in India. Dubai is a
major refining centre and a transit point for gold into
India, and so with both the LBMA and DGD standards
in place, our suppliers in India can easily source
conflict-free gold.
Signet has asked all suppliers to be fully compliant with the
SRSP by the end of 2013, and once suppliers confirm
compliance, the SRSP is a required reference on all
invoices, delivery notes and all other relevant
documentation (for example, alongside and in the same
way as the Kimberley Process statements for diamonds).
Through this process, we learned that Signet was one of
the leading companies doing this work, and so we had to
spend a lot of time educating and helping our supply chain
but now, as we see the results of the compliance reports
from our suppliers, we can see that this effort was very
worthwhile.
Simply, take the SRSPs from the Signet website
(www.signetjewelers.com) and apply the guidance to
wherever you source your gold. Establish clear terms of
business with your suppliers, and make sure you
understand who you are buying from (known as “Know
Your Counterparty”) and don’t deal in any gold if you
are not sure of its provenance. In addition, if you buy
gold in bar form, make the DGD and LBMA “good
delivery” a part of your terms of business with the bank
or whoever sells you those bars.
What is your advice to jewellery manufacturers and
retailers in UAE, GCC and Indian subcontinent, if
they need to comply with SRSP? Would it
assist/add value if DGD bars were used in their
supply chain?