For the Dubai Multi Commodities Center (DMCC), its incorporation was underpinned by gold.
Designed to provide the physical and financial infrastructure needed to create a hub for global commodities trading, it wasn’t until Standard Bank London and Dubai Islamic Bank were the first to make gold Sharia compliant by launching the first and only pioneering gold to market was Sukuk, which raised $200 million, the proceeds of which were used to fund the construction of its first commercial towers, namely Gold, Silver, and Almas.
After establishing a fundamental environment, the Dubai Gold & Commodities Exchange (DGCX) debuted as one of its subsidiaries in 2005, becoming the region’s first commodity futures exchange.
With a formally established exchange that not only offers guaranteed settlements, reduced counterparty risk, fully transparent fee structures and access to regional and international liquidity pools, DMCC’s facilities and services – particularly its vault, which was developed in partnership with Brink’s Global Services – offer this helped support the development of not only its futures market but also the physical one. These today include Sharia Gold, India Gold Quanto, Daily Gold and Physical Gold Futures & Spot Gold Contracts.
Having conquered the physical market, DMCC next focuses on the opportunities for bullion in the digital space.
Photo credit: Virendra Saklani/Gulf News
Dubai and DMCC feel like they are at the center of the busy world of precious metals trading.
Photo credit: Virendra Saklani/Gulf News
research to refinement
As a single location that fully covers the entire gold value chain, from research and refining to trade and investment, Dubai has risen to account for around 25 percent of world trade. However, this was only made possible by creating and maintaining the right environment. Much like China, Indonesia and Uzbekistan remain the largest producers in Asia, with China and India being the largest consumers, Singapore and Hong Kong remain the law’s favored trading venues due to their zero bullion tax and strong rule.
Similarly, other centers like Luxembourg have remained attractive and competitive by meeting the increasing demand for ESG products by offering fair trade bars through their state savings bank. Similar to other Fair Trade products, the BCEE guarantees that for every kilo of gold sold, Fair Trade receives a premium of $2,000 in addition to the guaranteed fair minimum wage, paid directly to the community of the Macdesa mine in southern Peru for the gold will be dismantled.
As a lesson learned from the regulated economies of least resistance, hopefully the same philosophy will be applied to the UAE’s coinage and coinage industry, thereby attracting another branch of the gold industry to capitalize on the country’s existing industries.
An epicenter for gold
If I had to mention a second important political advantage, it would be DMCC’s unwavering commitment to serving its stakeholders by remaining an impartial entity with its sole commitment to its community and the larger long-term vision of Dubai and the UAE. Driven by his own decree, his duty to create an optimal environment has resulted in Dubai becoming an epicenter for the global physical gold ecosystem, which includes mining supply sources from Africa and the former CIS countries, with key demand markets in Asia, Europe and USA connects USA, in a globally centralized time zone that facilitates 24/7 trading activities.
Another practice that has helped Dubai’s gold industry tremendously is the collaboration, most recently exemplified by DGCX’s agreement with FinMet, who not only bring their wealth of experience, but also support the launch of new products and act in an advisory capacity to new and emerging banks Joining will be members looking for greater variety in their product needs.
Bullion’s place in the digital economy
It will be interesting to see how gold translates into the digital economy, particularly blockchain and crypto – with companies like Pax (PAXG) offering an asset-backed token, where a token holds a fine troy ounce of a stored London Good Delivery Gold Bullion Represents Professional Vault Investments, perhaps more investors will see this as an easier and safer way to invest.
Certainly, the DMCC Crypto Center will continue to monitor the market and be ready when opportunity, regulation and demand meet.
Much like the development of the broader gold industry in Dubai, the release of our latest bullion coins is still in its infancy, especially when compared to the Krugerrand, which has been around since 1967 and is by far the world’s most popular 1oz coin. As a store of value that reflects the exceptional progress that has been made and forged only from fully compliant 999.9 24k gold, I believe it is only a matter of time before history repeats itself.
Ahmed bin Sulayem
The author is Chairman and CEO of DMCC.
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