Baubles, bangles and bullion

New figures confirm what everyone in the narrow streets of the gold souk already knows: Dubai is witnessing a flood of scrap metal.

Jewellery lovers from the Gulf, India and beyond are flogging their bangles and bracelets in order to bank some currency. Dubai's refiners are then melting them down and forging bullion bars, which investors are snapping up amid the global financial turmoil. Official figures reveal there was a 21% increase in physical gold imports last year, to 674 tonnes. Most of this is then re-exported.

"A standard Samsonite briefcase will comfortably hold a million dollars'-worth of gold bullion," says Jeff Rhodes, CEO of INTL Commodities, a Dubai-based finance company part-owned by the Nasdaq-listed International Assets. "If you live in a country with political instability, it's attractive to have such a mobile store of value. And a lot of investors today see gold as a safe haven compared with financial assets and currencies."

Fifty years ago, Dubai's port was a hotbed for smugglers. But now the gold trade is going straight, with a tough regulator and world-class infrastructure, helping to establish the city as a legitimate global hub for trading the physical metal.

Rhodes has witnessed the past decade of that transformation first-hand, and has seen the city adapt to wild swings in the gold price. "If you'd told me 10 years ago we'd have a business at $900 an ounce, I wouldn't have believed you. High prices kill demand for jewellery. But in its place we're seeing demand for bullion. Dubai's gold market really is an industry for all seasons."

* Abu Dhabi has pumped more than $4 billion into the city's banks. That's worrying many bankers in Dubai, who are hoping their oil-rich neighbour spreads its wealth across the entire country - particularly Dubai - as the credit crunch bites.

* Officials in Dubai have hit back at suggestions the population is shrinking. The city's chief economist says Dubai is issuing more residence visas than it is cancelling - the balance is about 1000 per day. UBS has said the population will fall by 8% this year, as expats lose their jobs and return home.