MUMBAI/LONDON, March 9 (Reuters) - Gold in Dubai is trading at a discount to London as flight constraints caused by the Middle East conflict keep more bullion in the local market, while demand remains subdued amid uncertainty over the length of the war, analysts and traders said.
Flows of physical gold through Dubai — a major global trading hub supplying Switzerland, Hong Kong and India — have been disrupted for 10 days as the U.S.–Israeli war on Iran triggered widespread passenger flight cancellations across the Middle East.
"The market remains at a discount, but in thin trade the variation is wide, ranging from about $10 to $30 per troy ounce," said a Dubai-based bullion dealer.
Demand is weak both in India, a major bullion consumer, and the Middle East, while price volatility is prompting buyers to delay purchases, the dealer added.
Spot gold prices in London are down 6% since the initial safe-haven spike at the start of the conflict on February 28. Bullion was last at $5,109 per troy ounce, while oil prices soared.
"The known unknowns — conflict duration, escalation trajectory, and the macro inflation pass-through — remain unresolved," said Nicky Shiels, head of metals strategy at MKS PAMP, adding that gold was facing more volatility.
"Loco Dubai Gold trading at a discount to London is telling just as the 2011 Arab Spring saw steep discounts in the region," Shiels added.
The markets' response to the conflict in the Middle East has been less extreme than might have been thought, possibly implying that the consensus judgement is that the conflict will be short-lived, analysts at Heraeus said.
When Russia invaded Ukraine in February 2022, gold prices rallied for two weeks but later erased those gains, ending the year little changed as the broader sideways trend reasserted itself, the analysts added.
Reporting by Rajendra Jadhav and Polina Devitt; Editing by Diti Pujara
