The Dubai Gold Receipts (DGRs), an electronic vault receipt system operated by the Dubai Multi Commodities Centre (DMCC), have enabled secured financing worth more than $100 million (Dh367m) involving gold traders, bullion banks and vault operators.
Gold traders, bullion banks and vault operators have used DGR to enable almost $104m of financing against a total of 4,442kg of gold and 1,500kg of silver stored in DMCC-approved vaults in the UAE.
All DMCC-approved vault operators – Brinks Global Services, Transguard and Group 4 Securicor International – have been utilised for these transactions.
DGR, an innovative tool for facilitating trade finance activities for gold and silver, is an integrated electronic vault receipt system designed to enable businesses to access lines of credit against their inventories, by pledging them in favour of member banks. Under the terms of DGR, members who store precious metal in a DMCC-approved bullion vaults – can be issued an electronic DGR against the value of the goods. The member can then use the online vault receipt to obtain financing from member banks and financiers.
The DGR system also enables transfer of title to the underlying gold or silver to trader members within the system, through an electronic transfer endorsement process. DMCC has established a set legal framework, that governs each electronic transaction, so members are provided with the opportunity to trade their goods with increased confidence among a network of approved associates.
The title transfer functionality also enables members to carry out physical deliveries in the UAE against the gold or silver futures contracts traded on the Dubai Gold and Commodities Exchange, a DMCC initiative.
“The design of DMCC’s DGR system means its geographical footprint can extend beyond the country, and gold traders across the world can access lines of credit from globally-based bankers, against their gold stored in UAE-based vaults,” said the statement.
Ahmed bin Sulayem, Executive Chairman of DMCC, said: “Access to finance is one of the most crucial factors that drives commodity trade worldwide. Given the current volatility in global gold markets and the ensuing Basel II regime, banks are on the lookout for secured lending options that enable them to mitigate risk better.
“DMCC is committed to enhancing physical infrastructure and ancillary services for the gold and precious metals sector, and has developed this innovative, tradeable, electronic vault receipt that may be used for effective risk mitigation by banks. DGR thus offers traders and banks alike an ideal trade financing tool.”
Ian MacDonald, Executive Director, Gold and Precious Metals, DMCC, said: “The confidence both traders and bankers place in the DGR model is evident from the fact it has enabled financing of more than $100m in only eight months. DGR is increasingly being recognised as an innovative risk mitigating trade financing tool.”
Gold receipts allow secured financing worth $104m