UAE residents keen on gold investment

The 971 Report

Gold price have been shining this year on the back of global economic turmoil and political unrest in the MENA region. With experts predicting a rise in the prices beginning next year, investors in the UAE are not missing an opportunity to put their hard-earned money into jewellery, bars or gold funds.

Interestingly, among UAE expats, investment in gold remains a priority, followed by other investments such as property and equities, UK-based Friends Provident International said in its latest survey.

Spending on premium goods and experiences by consumers in the Middle East is on the rise, according to the new American Express Middle East Luxury Spending Tracker.

Biju Joy, general manager at Dubai Gold and Jewellery Group, said: "The investment craze for gold has been very strong. The retail sector expects further growth as more and more household investors are turning to gold. Therefore demand for gold as a commodity and an investment is only rising."
Pradeep Unni, senior analyst at Richcomm Global Services said: "The trend is definitely up and gold is certainly heading to another year of double digit gains while other investments have visibly stalled. In the coming months, to be more specific, in early 2013, gold may spike to new highs with all possibility of gold cutting the $2000-mark per ounce convincingly."

Gold is currently trading in a tight range around $1,750/ounce.

Since the global crisis began in 2008, gold has also become a mainstream financial asset. Its demand as an insurance against the risk of surging inflation and as a safe haven from other shocks has increased.

"Amidst the current economic crisis, gold seems to have attained a status of an independent currency which carries no financial obligations or debt on its back. Being the only investment which is highly liquid, which can neither be created nor printed, the appeal for the precious metal should increase," Pradeep Unni added. 

Types of investments available:

  • Physical gold such as coins, bars and jewellery. You can buy the physical gold and store it at home or in safes in banks. There are also approved vaults providing insurance facilities for stored gold.
  • Exchange Traded Funds (ETFs): Gold ETFs or gold funds track the gold prices directly, but such funds do not necessarily move in proportion to the gold prices. Many gold funds are also linked to gold mining firms and the returns are not as strong as gold’s move.
  • GOLD Futures on DGCX: Investing in gold through an exchange traded contracts through registered brokers is another way of investing in gold. Futures contracts on the Dubai Gold and Commodities exchange (DGCX) is highly liquid. Investing in gold through futures and options also provides high leverage and helps to take advantage of the short term and medium term price movement.

Be cautious before investing

  • Gold is not immune to the general panic in other markets and hence will fluctuate in line with the general sentiment in markets. Gold is a safe haven asset, but not necessarily an investment product to hoard over very long time-frame.
  • We have seen very violent corrections in the past that has eroded the confidence of the investors.
  • Investing in gold after reading the macro news isn’t enough as gold market is more of a ‘tangled web’ with too many factors playing at the same juncture and no factor can be discounted to the other.

Gold expected to touch Rs 35,000 mark by January Gold prices are expected to remain firm in the weeks ahead and stay in the Rs 33,500-35,000 range by the end of the year.

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