Miami is a magnet for gold
07/23/2013 6:47 PM
07/23/2013 6:50 PM
Small gold bars glow red hot as they melt and mix together in a crucible. Then the molten gold is poured into a mold to form a larger bar that will undergo a complicated fire assay process that will determine its purity.
On any given day in the downtown Miami office of Kaloti Metals & Logistics, a gold and precious metals trading house, millions of dollars’ worth of gold arrives, is melted, formed into bars, assayed and shipped out. Last year the company handled 22 tons of gold worth nearly $1 billion and is on its way to surpassing that in 2013.
Although Miami may have a reputation for glitz and bling, few people realize it is one of the hubs for the nation’s gold trade.
Last year — for the first time — gold was both the top import and export from the Miami Customs District, which includes airports and seaports from Palm Beach County to Key West. But the reality is most of the gold entered and left via Miami International Airport.
More gold arrived in Miami than any other U.S. customs district last year and it ranked third in outbound shipments of gold. The most common routes take the glittery metal from mines in Colombia, Mexico, Bolivia and Peru and the gold trading center of Curacao, to Miami and then on to Switzerland, the United Arab Emirates and the Dominican Republic.
South Florida is home to not only one of the largest precious metal refineries in North America — Republic Metals Corp. in Opa-locka — but it’s also a hub for bullion trading as well as assaying, refining, logistics and financing operations.
It’s a business of locked doors and bank-sized vaults. Because security is so critical and because even small amounts of gold are worth so much, those in the gold trade generally prefer to keep a low profile and many gold-related firms are family businesses.
But executives at Kaloti, which is located in the heart of Miami’s jewelry and diamond district, were willing to sit down and detail how their business works.
The Miami office is a relative newcomer — it opened for business a little more than two years ago— but it has a strategic affiliation with Kaloti Jewellery Group, a Dubai firm that has been in the precious-metal business for more than 25 years.
The day before the firm makes gold purchases, executives at Kaloti Metals in Miami tell the Dubai company how much gold they expect to buy the next day and Kaloti Jewellery provides the financing. “Before we even open the office the next day, the money is here,’’ said Awni Kaloti, managing director in Miami.
Kaloti Metals, which employs 15 people, gets its gold from a number of sources, but it’s a far different operation from the companies that advertise on television that they will buy your old gold jewelry.
It does buy scrap gold — mainly from pawn shops in New York, Miami and Chicago — but the bulk of its business is with gold traders and customers in Peru, Bolivia, Puerto Rico, Honduras, Nicaragua and Curacao — where many gold consolidators who deal with South and Central American countries are located.
Colombia and Mexico also are big gold exporters to Miami, but Kaloti currently doesn’t do business with them because executives consider the markets a bit riskier.
“Before we do business with anyone, we must know who our customers are and the source of their gold,’’ said Alvaro Rodriguez, the operational manager.
On July 15, Kaloti Metals opened a representative office in Peru, the world’s sixth largest gold producer. “We have seven or eight large customers in Peru. There’s a lot of potential there but also a lot of competition,’’ said Kaloti. “If we have a representative office and pay them on the spot, then they will be able to expand their business. Ultimately it’s about providing better service.’’
The Peruvian business will function much as the Miami office does. The same day the gold arrives at Kaloti Metals, it’s sent out, and all the advances sent from Dubai have been paid to customers. “By 5 p.m. we have no money and no gold in this office,’’ said Rodriguez.
Most of the gold arrives in bars, but it still must be assayed to verify the gold content. Gold that is 14 karat is 58 percent pure, for example, and the highest grade is 24 karat gold, which is 99.9 percent pure and shinier than the 14-karat gold commonly used in jewelry in the United States.
Throughout history the quest for gold may have moved empires, but there’s nothing very glamorous about the way Kaloti ships its gold. Bars and ingots are placed in buckets that Kaloti purchases from Home Depot, and the buckets are placed inside bags that are sealed multiple times for security.
Nearly all the gold processed at Kaloti Metals is sent via air to Kaloti Jewellery, which has a refinery with a 300-ton capacity in Dubai.
“Dubai is becoming the capital of the world for gold,’’ said Kaloti.
From January to May, $468.2 million worth of gold and gold products, including gold-plated jewelry, were sent from the Miami district to the United Arab Emirates, up from $201.6 million for the similar period in 2012, according to an analysis done for the Miami Herald by Datamyne, a Miami company that has the largest searchable trade database in the world.
But last year and so far this year, most of the gold exported from Miami went to Switzerland, with its legendary vaults to park gold and its tradition of first-rate metal refineries.
From January to May of this year, $1.8 billion worth of gold and gold products were sent to Switzerland from Miami, but exports are declining. Last year, gold and gold products exports to Switzerland were valued at $3.07 billion for the January-to-May period, according to Datamyne.
“By value, gold exports and imports have really shot up in the past few years. It’s basically gold that is transported from the mines in Latin America to Switzerland,’’ said Gabriel Rodriguez, president of A Customs Brokerage.
One of the reasons gold climbed in the Miami trade rankings is because the price of gold soared. In 2009, Miami’s total gold imports totaled just $2.14 billion, but by last year, they had rocketed to $7.25 billion. If scrap gold and gold-plated jewelry and other products are added in, the total shoots up to $8.8 billion.
As the global recession took hold in 2008 and short-term investors began flocking to the relative safety of gold, it pushed up the price for a troy ounce of gold from $871.65 that year to an all-time high of more than $1,900 in after-hours trading in late August and September 2011.
The price has been trending down since, and took a big slide in April, when gold plummeted to less than $1,400 an ounce. On Tuesday gold futures for December delivery settled at $1,335 an ounce.
Demand for gold was down 13 percent during the first quarter of this year, according to the World Gold Council.
Still, Miami seems to be holding its own as a gold hub. Through May of this year, gold was still the Miami Customs District’s top import. Gold exports during the same period were down 29 percent in value, but that was still good enough for No. 2, after aircraft exports.
That’s thanks to companies such Kaloti and Republic Metals Corp. The Opa-locka company began with a $2,500 investment in 1980 and in the beginning refined just 50 to 100 ounces of gold at a time. In 1990, Republic, which also handles other precious metals, built a 40,000-square-foot refinery and recently added 75,000 square feet. It now has offices in New York, Los Angeles and Toronto.
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