Forbes Middle East


UAE Traders Are Going After African Gold

Paulius Stankevicius
UAE Traders Are Going After African Gold
[caption id="attachment_26950" align="alignright" width="237"]Paulius Stankevicius Paulius Stankevicius[/caption]

Gold​ ​is​ ​a​ ​well​-respected​ ​commodity​ ​around​ ​the​ ​world, ​ ​especially​ ​in​ ​UAE. ​ ​As​ ​some say​ ​-​ ​Dubai​ ​is​ ​the​ ​city​ ​of​ ​gold. ​ ​Gold’s​ ​beauty​ ​as​ ​a​ ​commodity​ ​is​ ​tremendous. ​

​It​ ​shines bright​ ​and​ ​brings​ ​luxury​ ​to​ ​its​ ​environment. ​ ​Stock​ ​trading​ ​on​ ​gold​ ​is​ ​one​ ​of​ ​the​ ​hottest topics​ ​in​ ​the​ ​market​ ​as​ ​well​ ​but​ ​what​ ​do​ ​we​ ​really​ ​know​ ​about​ ​gold​ ​besides​ ​that​ ​it’s expensive​ ​and​ ​available​ ​only​ ​for​ ​the​ ​rich​ ​ones?

One​ ​of​ ​the​ ​largest​ ​world’s​ ​gold​ ​production​ ​come​ ​from​ ​Africa. With countries ​like​ ​Guinea, ​ ​Congo, ​ ​Kenya​ ​that attract ​foreign​ ​investors​ ​to​ ​buy gold​ ​but​ ​Ghana​ ​is​ ​the​ ​main African power horse when it comes to gold production.

Ghana​ ​is​ ​the​ ​largest​ ​country​ ​in​ ​terms​ ​of​ ​circulating gold​ ​production​ ​in​ ​Africa.

Lately, ​ ​Ghana​ ​has​ ​received​ ​a​ ​lot​ ​of​ ​attention​ ​from​ ​gold​ ​buyers​ ​in​ ​UAE, ​ ​but​ ​how​ ​a​ ​simple​ ​African​ ​country​ ​received​ ​such​ ​attention​ ​from​ ​investors? After​ ​all​ ​it’s​ ​about​ ​the​ ​profits. ​ ​

You​ ​can​ ​actually​ ​purchase​ cheaper ​gold​ ​in​ ​Ghana​. Suppliers​ ​offer​ ​large​ ​discounts​ ​and​ ​most​ ​of​ ​them​ ​are​ ​under​ ​the​ London Bullion Market Association (​LBMA), ​ which is the ​official​ ​market price, ​ ​and​ ​Dubai​ ​gold​ ​spot​ ​price, ​ ​which​ ​is​ ​usually​ ​couple​ ​hundred​ ​US​ ​dollars​ ​more ​than​ the ​LBMA price.

Recently​ ​more​ ​and​ ​more​ ​Arab​ ​gold​ ​investors​ ​are​ ​purchasing​ ​gold​ ​from​ ​Africa​ ​at​ ​a discounted​ ​rate​ ​and​​ ​reselling​ ​it​ ​back​ ​in​ ​UAE​ ​for​ ​either​ ​LBMA​ ​price​ ​or​ ​Dubai’s spot​ ​price,​ ​profiting​ ​in​ ​hundreds​ ​of​ ​thousands​ ​of​ ​dollars​ ​in​ ​one​ ​single​ ​tranche.​ ​So​ ​how does​ ​it​ ​work?

In​ ​most​ ​cases​ ​gold​ ​buyers​ ​engage​ ​with​ ​a​ ​broker​ ​agency​ ​to​ ​help​ ​facilitate​ intermediate ​deals between​ ​Africa​ ​and​ ​UAE. ​ ​

Buyers​ ​place​ ​orders​ ​up​ ​to​ ​hundreds​ ​of​ ​kilograms​ ​a​ ​month making​​ ​multimillion​ ​dollar​ ​orders. ​ ​Agencies​ ​in​ ​such​ ​cases​ ​earn​ ​extreme​ ​profits reaching​ ​6​ ​digits​. ​ ​

However, ​ ​very​ ​few​ ​can​ ​deliver​ ​such​ ​request​ ​as​ ​gold deals​ ​are​ ​extremely​ ​difficult​ ​to​ ​execute, ​ ​requires​ ​a​ ​lot​ ​of​ ​patience​ ​and​ ​full awareness of the country’s importing regulations.

Buyers purchase the gold with documents and bring it to Dubai via customs where they get issues all the needed documents to enter their goods to UAE.

​Many​ ​wait​ ​for years​ ​to​ ​close​ ​a​ ​deal,​ ​only​ ​few​ ​actually​ ​succeed. Gold​ ​deals​ ​usually​ ​requires​ ​a trader’s​ ​physical​ ​presence​ ​in​ ​Africa for ​face​-​to​-​face meetings​ ​with​ ​suppliers. When​ ​you​ ​are​ ​dealing​ ​with​ ​Africans suppliers, ​it​ ​is​ ​very​ ​important​ ​to respect​ ​culture​ ​and​ ​traditions​ ​especially​ ​when​ ​dealing​ ​in​ ​gold.

There​ ​is​ ​a​ ​lot​ ​of​ ​danger​ ​involved, ​ ​that’s​ ​why​ ​gold​ ​deals​ ​have​ ​become​ ​extremely complicated. ​ ​

Buyers​ ​are​ ​not​ ​willing​ ​to​ ​go​ ​to​ ​Africa, but​ ​the​ ​ones​ ​who​ ​do​ ​actually​ ​make massive​ ​returns. The​ ​risks​ ​are​ ​there​ ​but​ ​huge​ ​revenue margins are luring​ ​investors​ ​towards taking​ ​this​ ​big​ ​steps​ ​in​ ​the​ ​gold​ ​venture.

American​ ​and​ ​European​ ​companies​ ​keep​ ​trying​ ​to​ ​establish​ ​the​ ​golden​ ​road​ ​between continents to unite​ ​Africa’s​ ​gold​ ​production​ ​with​ ​the​ ​rest​ ​of​ ​the​ ​world. ​ ​

The​ ​journey seem​ ​extremely​ ​hard​ ​to​ ​accomplish​ ​but​ ​yet​ ​the​ ​vision​ ​of​ ​it, ​ ​is​ ​so​ ​rewarding​ ​that​ ​many venture​ ​capitalists​ ​are​ ​joining​ ​the​ ​African​ ​gold​ ​rush.

Ghana​ ​has​ ​become​ ​the​ ​center​ ​of​ ​multinational​ ​foreign​ ​companies​ ​center​ ​for​ ​dealing​ ​in gold. ​

​If​ ​you​ ​are​ ​travelling​ ​through​ ​the​ ​capital, ​ ​Accra, ​ ​you​ ​may​ ​see​ ​more​ ​foreign traders than​ ​locals. ​

​There​ ​is​ ​no​ ​other​ ​business​ ​you​ ​can​ ​possibly​ ​do​ ​in​ ​Ghana​ ​like gold​. It ​is​ ​the only​ way of financial ​survival​ ​for​ many locals ​people. ​whether​ ​​poor​ ​or​ ​rich Ghanaians, they​ ​are​ ​most​ ​likely​ to be ​somehow involved​ ​in​ ​gold​ ​business.

Paulius Stankevicius, CEO & Founder, Stankevicius MGM Consulting

Paulius Stankevicius is a CEO and Founder of Stankevicius MGM, PR and Advertising firm. Paulius Stankevicius has helped clients to raise over $500M in funding through professional PR and advertising strategies.

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