DUBAI MOVES INTO GOLD FUTURESDubai moves into gold futures
>By Kevin Morrison in Johannesburg
>Published: November 17 2005 17:46 | Last updated: November 17 2005 17:46
>>
Dubai, the ambitious Gulf emirate seeking a sharp expansion of its role in global financial markets, will launch its first gold futures contract next week.
Dubai is a major centre for trading in physical gold. Its souks are popular with tourists buying gold jewellery, and it has long been a gateway for gold heading to India, which accounts for about a fifth of global gold jewellery purchases. This has prompted claims that 500 tonnes of gold are traded in Dubai each year, about 20 per cent of the amount mined annually.
Colin Griffith, executive director gold at the Dubai Metals and Commodities Centre, said a 1kg gold futures contract would be launched next Tuesday as the first of many commodity futures contracts to be launched over the next 18 months on the new electronic exchange.
The new Dubai Gold and Commodities Exchange (DGCX) is 50 per cent owned by the DMCC, a free zone authority aimed at the commodity industry. Indian investors own the other half.
Mr Griffith said a silver contract is expected to be launched by the end of March, to be followed by gold and silver options, a fuel oil futures contract and a steel futures contract. “We have a lot of interest from the region in the gold contract,” said Mr Griffith.
He said the Dubai gold contract would complement trading in London, the world’s largest bullion market, rather than detract from it. The markets’ time zones are different and Dubai’s 1kg bar contract was smaller than the 12.5kg bar traded in London and better suited to the region’s jewellery trade.
London gold dealers welcomed the move, which they hope will expand the gold market. Investment banks such as JPMorgan plan to trade on the new market.
Gold futures have been launched during the past two years on India’s two commodity exchanges.
But Mr Griffith said the Dubai dollar based contract should create arbitrage opportunities with the Indian contracts, which are in rupees.
The new Dubai gold contract has the backing of the Multi Commodity Exchange of India, as well as Financial Technologies India, which is providing the technology for the new exchange, with both Indian groups shareholders in the new exchange.
“This is one of the most exciting developments I have seen in the gold market in the 25 years I have been in the trade,” said Jeffrey Rhodes, general manager of Standard Bank in Dubai. Standard Bank is one of 60 companies that have become members of the DGCX, which is expected to process another 140 membership applications by the end of the year.