Silver ETF for Dubai as they fly in bullion for the Hunts of Arabia
Posted on 18 November 2008 with no comments from readers
The Dubai Multi Commodities Center is understood to be putting the finishing touches to an exchange traded fund for silver with a launch likely next month as demand for silver has surged in the past six months.
Local bullion dealers are having to fly heavy silver bullion bars in from around the globe to meet demand as traditional sources closer to Dubai have been exhausted. The DMCC has successfully established itself as a regional hub for commodities trading over the past few years, and has its own swanky new business park with its gold, silver and diamond towers.
City of Gold
Around 20 per cent of the world’s physical gold trade is conducted through Dubai which used to be the epicenter of gold smuggling to India thirty years ago when import taxes were sky high. Nowadays Dubai is a convenient logistics center for commodities traders and still tax free.
The details of the silver ETF are being kept under wraps for the launch but plans seem advanced. Local jewelers have long used silver in a 25:75 amalgam with gold to create white-gold which is popular with consumers.
But clearly the ETF is an strictly an investment product, and demand for the shiniest of metals has been rising strongly, as evidenced by the high premiums now being paid on coins and bullion locally.
ETF price advantage
The latter also gives the ETF a natural advantage. Its price will be closely linked to the lower spot price for physical silver, and not be inflated by the high premiums now paid on physical silver.
Investors will no doubt appreciate this keen pricing advantage, and hope to also profit from the leverage silver offers to the gold price. In previous gold price booms silver has outperformed the yellow metal, and the gold-to-silver price ratio has fallen sharply.
Will the new Dubai silver ETF have a big enough impact on the tiny global silver market to send prices higher like the Hunt Brothers did in the late 1970s when they cornered the market? Well, nothing succeeds like success and a silver ETF in Dubai looks like being the right product in the right place at the right time.
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no Comments posted by readers:
I’ve read where some say that ETFs enable the vicious short selling which is responsible for the manipulation in PMs but do not have a full understanding on how exactly that works. Therefore it is recommended to stay out of these ETFs altogether. Can you comment on this?
thanks
Phil
Unless your surname is Hunt and you have billions to invest why should you worry about this – you are not in a position to affect the outcome one little bit. ETFs are efficient and cheap and a great way to buy silver which has become a rare commodity at a reasonable price. Don’t get too hung up on ethics and pieces of metal!
In my experience, ETF’s ARE an easy way to buy into silver or gold. However, You would be wise to ask for the serial numbers of the bars which you have bought through the ETF. Also, the paper price of silver of late is not a true reflection of the price of the physical metal. There is a huge premium especially for 100 ounce bars, up to $5.00 per ounce.