By Sarah Townsend
Proposed contract designed to appeal to smaller, more risk-averse investors
The Dubai Gold and Commodities Exchange (DGCX) is considering launching a new spot gold contract for use by retail investors and traders, it announced on Saturday.
The DGCX signed a memorandum of understanding with free zone authority Dubai Multi Commodities Centre (DMCC) and National Bank of Ras Al Khaimah (Rakbank) to develop bullion products such as the proposed contract.
A potential retail spot gold contract could have a smaller denomination size than the existing DGCX Spot Gold contract, which requires physical delivery of one kilogram gold bars.
Launched in 2016, the DGCX Spot Gold contract has been used by several institutional investors and other players from the region and overseas.
The DGCX said in a statement that the proposed new contract would be “fully backed by physical gold, and held in a electronic form with the capability of physical redemption”.
It is thought that this would cast a wider net in terms of target investor audience and is expected to have greater appeal for retailers and smaller, more risk-averse investors in the region.
Gaurang Desai, CEO of the DGCX, commented on this MoU: “We strongly believe that by working together with RAKBANK and DMCC, we can…create synergies and develop a safe and efficient platform for retail gold trade and investment in Dubai, ultimately contributing to the development of the region’s bullion market.”
And RAKBANK CEO Peter England said: “We recognise the strong appeal of owning gold across the UAE with many people having a strong belief in the great security and safe haven store of value that physical gold brings.
“Rakbank’s tie up with the DMCC and DGCX will enable the development of a platform that allows customers, large and small, from across the region to acquire gold, at competitive prices, with a click of a button through an integrated digital banking platform.
The DGCX also offers trade in gold futures contracts and last year said it had obtained a licence from the Shanghai Gold Exchange to list Shanghai gold futures, which would be the first yuan-denominated gold futures product offered outside China.