Dubai Gold Contracts Turnover $128 Billion


". . .all Dubai gold-based assets are going to see very much larger volumes."

The total turnover in Dubai gold contracts has reached $128 billion since they were first launched on the Dubai Gold & Commodities Exchange, with the volume of contracts passing three million for the first time in May.

A statement from the DGCX said that with volumes surpassing three million contracts the exchange had 'entered a new phase of development.'

CEO Malcolm Wall said: 'Despite the uncertainty of the global market, participants continue to favor futures contracts to hedge and balance their portfolios. The understanding of derivatives in the region, their usage and benefits is continuously improving.'

In the current year, the volume of contracts has exceeded 410,000. Dubai is known as The City of Gold and chose to launch derivative trading with its favorite precious metal, but a broad range of commodity futures contracts are now listed on the DGCX.

Seasoned gold industry observers might be amused to hear that Dubai has been discovering derivative trading during a period when such practices have come in for severe criticism for their role in leveraging up markets prior to the global financial crisis.

It is unknown how many of the Dubai contracts are used by local jewelers to hedge the upcoming price of gold, but there is a large physical market for gold in the emirate that handles more than 20% of the world gold trade.

Dubai also launched its own gold ETF earlier this year, which is also gaining in popularity with local investors—particularly institutional investors.

It is a matter of speculation as to what the size of positions held in gold might be on the DGCX as contracts are clearly being rolled over, and the headline sum of turnover, while impressive, does not give this away.

Could the Saudi Arabians who bought $3.5 billion in physical gold last autumn also achieve similar levels of exposure to the precious metal on the DGCX? It is possible, although the Dubai-based ETF has yet to show this level of ownership.

But as the gold market looks poised to take off to the next level beyond $1,000 an ounce, sooner rather than later, and this autumn at the latest, all Dubai gold-based assets are going to see very much larger volumes.

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