DUBAI, 8 October 2007 — Record gold prices have led to an increase in the flow of scrap gold coming onto the market in Dubai in recent weeks, industry sources said on Saturday.

“Since gold prices rose by end of September, we have seen an increasing amount of scrap gold in the market,” said Moaz Barakat, World Gold Council (WGC) managing director for the Middle East, Turkey and Pakistan.

Last year higher prices, coupled with the collapse of the Saudi equities market, led to a mass liquidation of gold assets, with Saudi scrap volumes increasing 44 percent, UK-based research firm GFMS said in April.

Barakat said current circumstance in Dubai were different.

“Unlike 2006 in Saudi Arabia, the market here looks healthy, and we are seeing a significant amount being exchanged between Dubai and countries like Saudi and Egypt.”

Spot gold rallied to $747.65 an ounce on Monday, its highest level since January 1980, mainly because the US dollar’s fall against the euro ignited purchases from investors.

“There was also a rise in the amount of scrap from Asia,” Jeff Rhodes, a gold trader based in Dubai, told Reuters.

While purchases from India’s jewelers are likely to slow in coming weeks as the country enters a period when Hindus pay respects to their ancestors, in other parts of Asia the price rally has failed to deter investors and spurred aggressive sales of scrap from jewelry makers.

A senior industry source in Dubai said scrap supply had plunged by as much as 80 percent earlier in the year, but since gold prices started to rise jewelers and other holders were cashing in on the rally. “If you visit the gold market now, you will see it is buzzing with even ordinary people selling their gold and some of them buying new pieces,” the source said.

Dubai gold sales rose 26 percent in value in August year on year as demand from tourists increased and the economy improved, the Dubai Gold and Jewelry Group said last month.

Tax-free jewelry in the United Arab Emirates’ gold souks and shopping malls draws Gulf Arab and Western tourists.

Gold sales by the UAE rose 22 percent in terms of value in the second quarter of 2007 from the year-ago period as demand from tourists increased, the WGC said.

The Dubai Gold and Jewelry Group expects the value of gold sales in the Gulf Arab region to grow by 15-20 percent a year as economies expand and tourism increases.

The region’s economies grew about seven percent in 2006 as high oil prices fuel rapid expansion.

Meanwhile, Dubai will probably receive its first credit rating this year as part of plans to become the second member of the United Arab Emirates federation to sell bonds, the Middle East Economic Digest reported.

Fitch Ratings is working on Dubai’s rating and JPMorgan Chase & Co will provide advice on any bonds, the London-based weekly said in its latest issue, citing sources close to Fitch.

Fitch Ratings offices in Dubai could not be reached for comment on Saturday.

Fitch assigned an ‘AA’ credit rating to Abu Dhabi, the largest of the oil-exporting UAE’s seven family-ruled emirates, before it sold a $1 billion, 5-year bond in July.

Those were the UAE’s first government bonds. The federal government of the world’s sixth largest oil exporter has no debt.

A Dubai government bond, like the one from Abu Dhabi, would help create a benchmark for UAE companies that are borrowing to finance expansion abroad.

Dubai Holding Commercial Operations, a firm owned by Dubai’s ruler, raised $2.46 billion in its debut bond sale in January to help refinance debt.