Dubai Multi Commodities Centre shifts its ETF’s from NASDAQ Dubai; Considering to offer spot gold contract to Dubai Gold & Commodities Exchange
Further weakening of dollar to help support higher gold prices
Renewed interest in futures market
Trust Securities DMCC, a clearing broker member of Dubai Gold & Commodities Exchange (DGCX), has announced that the demand for gold trading in Unitied Arab Emirates – the Arab world’s second biggest economy – is rising and off to a strong start for 2012.
Trading in gold futures on the Dubai Gold and Commodities Exchange (DGCX) rose 355.7 per cent between January to December 2011 period, while the total futures volume for the exchange was up 95 per cent for the month over the prior January.
Mr. Bruce Powers, Head of Research and Analysis at Trust Securities, said: “Gold may be coming out of a corrective phase that it has been in for the past five months after reaching a high in September 2011 and a subsequent 20 per cent decline. The precious metal remains in a long-term bull market that has persisted for the past 10 years.”
During the first half of 2011, positive media reports helped to attract investors to the gold market as it rose as much as 25 per cent in only two months before reaching a peak. That rate of price appreciation was unsustainable and was followed by a 20 per cent decline in the price. Since then gold has rallied attracting the attention of investors once again.
Mr. Asim Khan, CEO of Trust Securities, said: “We’ve seen renewed interest in recent months in the gold futures market. Since the end of 2011, gold has climbed over 16 per cent. It is a commodity which traded actively by our cliental, not only during long rallies, but also on the short side when gold is going down. This is one advantage of the futures market, the ability to profit on market rallies as well as declines, this helps achieve good risk-adjusted returns.”
Furthermore Trust Securities believes there are a number of global trends that should continue to support gold’s long-term bullish ascent, once the current price correction is complete. The central banks are continuing their loose monetary policies and expansion of the money supply is one component found to support higher gold prices. Another is a decline in the dollar.
Mr. Bruce said: “Further weakening in the dollar should help support higher gold prices as it takes fewer dollars for foreign buyers to purchase the same amount of gold. In early-January the dollar topped out and started declining while gold found a bottom shortly before. Since then their trends have moved in opposite directions. The reverse was true last year. As the dollar bottomed around late-September, gold topped out.”
To support investor demand for gold trading the Dubai Multi Commodities Centre (DMCC), which is connected to the DGCX, is considering offering spot gold in addition to currently traded gold futures, and also shifting its gold exchange traded funds (ETFs) from the Nasdaq Dubai exchange where it currently trades, to the DGCX where volumes should be higher. Technical issues are currently being worked out and once complete trading could start by mid-year.
The Middle East and UAE investors like the convenience of trading gold on the DGCX as it is a local exchange that operates under international standards. Short-term investors and traders are able to trade the price volatility, while others take advantage of the long-term trend. Some investors may opt to use the futures exchange to buy gold and take delivery of physical gold at expiry. Hedging strategies are used by gold and jewelry merchants to help manage pricing risk to their inventory and purchases.
