Gold and silver flows disrupted as Iran war grounds flights

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Global flows of gold and silver are suffering major disruption as war in the Middle East halts most air traffic into and out of Dubai, in a move that traders say could trigger further volatility in prices that have already suffered sharp swings this year.

Dubai is a leading hub for the shipment of bullion, accounting for around 20 per cent of global gold flows last year. That includes both bullion mined in Africa and then refined in the United Arab Emirates, as well as flows from Europe to Asia that transit there.

Traders and analysts say that if gold and silver cargoes are disrupted for a lengthy period, then this could push up regional prices in Asian markets and increase volatility for metals that have sold off sharply recently after historic bull markets.

“Gold availability has become a concern following the suspension of flights from the Middle East,” said John Reade, senior market strategist at the World Gold Council. “This is a reason that domestic prices [in India] moved sharply” from trading at a discount of around $50 per troy ounce on Friday, to being on par with London prices on Monday, he added.

Gold prices have dropped around 3 per cent this week to around $5,100 per troy ounce, but they are still almost 20 per cent higher than at the beginning of the year. 

Dubai was the world’s second-largest exporter of gold in 2024, according to customs data, with India the biggest destination for its shipments.

Rhona O’Connell, head of market analysis at StoneX, said India is likely to be most affected by the disruption in Dubai, because the emirate is a key entrepot for precious metals bound for India.

“In the short term, people should be able to manoeuvre around it, but if it goes on for a long time all bets are off,” said O’Connell. 

Since the US and Israeli attacks on Iran began on Saturday, most commercial air travel out of the Gulf region has been halted. A handful of passenger flights took off on Tuesday from Dubai, but people familiar with the flights said these were not carrying gold, as perishable cargoes were prioritised. 

“Nothing is moving anywhere by air right now,” said one bullion trader, adding that they hoped the disruption would not last long. Gold is typically transported on passenger planes as cargo, in volumes of up to five tonnes, worth about $830mn at current prices. 

Some logistics carriers said they were busy dealing with bullion deliveries that had already been made to airlines at London’s Heathrow airport, because the airlines were no longer able to move the cargo. 

This has resulted in a number of “frustrated exports” — goods that have already been submitted for customs clearance and must be formally withdrawn before they can be rerouted. 

For shipments leaving London, silver is currently being more affected than gold, according to market insiders. Wild gyrations in the silver price this year, fuelled in part by huge demand from Chinese retail investors, have caused inventories in China to fall to a 10-year low.

War in the Middle East is the latest disruption for bullion flows, which last year were impacted by fears of potential US tariffs, leading to the build-up of a huge stockpile of precious metals inside the US. 

Critics have long accused Dubai of being a recipient of illicit gold, with a report by non-governmental organisation SwissAid alleging tens of billions of dollars’ worth of gold were smuggled through the UAE in 2022.