Dubai Gold ETF to glitter with allocated gold

March 03, 2009

Commodity Online
DUBAI: Gold is emerging as the hottest commodity in Dubai. In a major fillip to gold trading in Middle East, the Nasdaq Dubai and World Gold Council on Monday launched its first gold exchange traded fund (ETF) in the City of Gold. The Dubai Gold ETF is both Shariah- compliant for Islamic investors and 100 per cent backed by physical, allocated gold.

The Dubai Gold ETF has started trading under the ticker symbol GOLD. The Gold ETF is the first new launch on the Nasdaq Dubai in 2009, and the one-time 60 basis point charge is exactly the same as other existing ETFs.

Commenting on the launch, World Gold Council (WGC) Chief Executive Officer Aram Shishmanian said that the Duabi Gold ETF is not a derivative product because it is 100 per cent backed by allocated gold held in London vaults by HSBC, and audited both by traditional and shariah auditors.

ALSO READ: Dubai to get Gold ETF from World Gold CounciL

Shishmanian said it is very important to understand the difference between unallocated and allocated gold. "The Dubai ETF has allocated gold, so there is no third party between the metal and its owner. The ETF certificate is an entitlement to one-tenth of an ounce of gold," he pointed out.

Analysts said the concept of allocated gold will make Dubai ETF sufficiently different to attract regional investors who already have the exchanges of the world at their finger tip.

‘We have launched a series of ETFs around the world and have always found that a regional product stimulates new demand,’ said Simon Village, executive director of Dubai Commodities Asset Management.

The new Gold ETF in Dubai will be sharia-compliant and would be marketed more widely across the Middle East’s Islamic world, as the region is a hot gold investment destination.

Founded in 1987, the World Gold Council is an organisation formed and funded by the world's leading gold mining companies with the aim of stimulating and maximising the demand for, and holding of, gold by consumers, investors, industry, and the official sector.

The Gold Council has been instrumental in working to lower regulatory barriers to the widespread ownership of gold products, helping to develop distribution systems and promoting the role of gold as a reserve asset in the official sector.

SPDR Gold Trust is the largest gold ETF by assets in the world. The ETF is jointly promoted by State Street Global Markets LLC, an affiliate of State Street Global Advisors and World Gold Trust Services, LLC, a wholly-owned subsidiary of the World Gold Council.

WGC has listed the SPDR gold ETF at Hong Kong Stock Exchange.

WGC recently said that several Middle East nations including the City of Gold, Dubai, are going to be action centers for gold investments. “We fee Middle East nations are going to witness lots of investments in gold sector. Several global companies including gold mining processing and production companies are looking at Middle East for major investments,” says Lama Al Saheb, head of marketing WGC head of marketing in Middle East.

WGC has predicted that investments into bullion industry, especially in gold and silver sectors, will see an upswing this year, despite the global recessionary trends.

According to a WGC report, gold investment in Middle East jumped 38 per cent in 2008 compared with 2007's fourth quarter. Saudi Arabia saw a massive 300 per cent jump in investment demand, Egypt 67 per cent and other Gulf countries registered a two per cent increase.

While UAE gold jewellery sales increased by 17 per cent in 2008 to exceed Dh13.7 billion compared with Dh11.4 billion in 2007, total gold demand in the Middle East was up one per cent in the fourth quarter of 2008 compared with 2007, said the Gold Council report.

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