The World Gold Council (WGC) will soon undertake a study of the UAE market to find out the acceptance of the idea of a Gold Accumulation Plan (Gap) similar to traditional currency savings accounts, a top official of the council has said.
Moaz Barakat, WGC’s Managing Director for the Middle East, Turkey and Pakistan, told Emirates Business the idea has already met with success in East Asian countries, especially Japan where there are now some 150,000 holders of gold savings account books. Some 50,000 to 60,000 ounces of gold are annually purchased or sold in this way, he said.
Gap is a savings programme where, instead of building up your savings in a national currency, you save gold. The gold is purchased using the cost-averaging principle, a popular and time-tested method for accumulating valuable assets such as gold. With cost-averaging, a fixed amount of money is used to purchase gold at regular intervals regardless of market price.
A customer saving using Gap deposits cash in financial institutions that deal with gold, such as banks or companies or even exchange shops, which in turn open a savings account in gold. Accumulating gold in regular, small intervals, regardless of the price, is known to be the most cost-effective way to buy gold over a long period of time. Cost-averaging reduces the risk of fluctuations in the price of gold because it averages your purchase price over the savings period.
Barakat said the WGC’s study in the UAE market will be widened to cover the regional markets and target wider sectors and demographics, especially in the light of cultural differences between world markets and their diverse views on gold.
He attributed the success of the idea in Japan to a culture of saving, but said the Middle East market could turn out to be different.
In the UAE, for instance, the market is equally divided between tourists who consume 50 per cent of gold sales, and who are not covered under the WGC project, and nationals who have been used to a traditional pattern of saving. Barakat said saving in gold will not affect the local currency savings in the light of legislations and professional control on gold saving, as the success of the concept in East Asia has proved.
No need to worry; gold will not take the place of local currencies, he said.
WGC to study gold savings tool