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Nasdaq Dubai launches gold securities trading today

By Mohamad Al Kady

Nasdaq Dubai will list Dubai Gold Securities under the name of "Dubai Gold" today. Trading will be according to spot gold prices.

According to a note by MAC Capital Advisors, each gold security will represent ownership of a 10th of an ounce of gold. Gold is stored on behalf of investors by HSBC, for a fee of 0.4 per cent per year.

"Initially, a creation basket of 50,000 shares will be issued. DGSLLP, the issuer, retains the ability to issue up to a billion shares according to market demand. The shares are expected to initially trade at a 10th of the spot gold price in increments of $0.10. Liquidity for Dubai Gold is virtually unlimited as it is backed by the London OTC gold market," the note said.

Ian Munro, Head Research at MAC Capital, said gold prices had rallied strongly during the past two years as the current economic crisis has unfolded, driven by a limited world supply of gold, investor demand for lower risk assets and demand for coins and jewellry. "Dubai Gold offers a number of benefits to investors including Shariah compliant, exposure to the gold price, portfolio diversification and access to a safe haven global asset with no credit risk as the shares are 100 per cent backed with physical gold. Thus, we believe that Dubai Gold makes a sound addition to an investment portfolio," he added.

According to Shiv Prakash, investment analyst at MAC Capital, gold has given a clear close above the trend line resistance and is nearing to test the previous highs of $1032 formed in March last year, which if breaks can see the resistance levels of $1200 in the medium term.

"As of now, the trend moves in a descending channel formation and is approaching the channel support levels where it becomes good to invest and can expect another rise in the days to come. It also trades above the 50 day simple moving average which is a positive sign," he said.