New ‘Vision of Dubai’ gold coins but futures contracts more popular
Posted on 17 June 2010 with no comments from readers
The second limited edition ‘Vision of Dubai’ gold coins are on sale from today featuring the first palm island on the reverse and Sheikh Mohammed bin Rashid Al Maktoum, the visionary Ruler of Dubai.
Demand for gold coins is rising in Dubai although the local recession since the global financial crisis struck in October 2008 has taken its toll on this business as it has on everything else.
Fine coins
Issued by the Dubai Multi Commodities Centre these fine coins represent a ‘practical, strategic investment opportunity’, according to the dmcc.ae website.
Jokalukkas Jewellers is selling the half ounce coin for Dhs2,380, and a quarter of an ounce for Dhs1,235. The present market price for an ounce of gold is around Dhs4,500. However, the first edition of these coins did not sell vey well.
Smaller investors in gold in Dubai are now more interested in trading futures on the DMCC’s Dubai Gold and Commodities Exchange. Gold futures represent the largest volume traded on the exchange and are up 15 per cent this year.
Futures contracts involve the use of margin so the rewards as the gold price goes up are magnified accordingly, although the reverse applies if the gold price falls. This is not just for big investors. The minimum investment to start trading on the DGCX platform is only $5,000 for gold.
DGCX platform
To trade gold futures on the DGCX you need to open an account with a registered broker, and supporting documentation includes a passport, bank statement, proof of address and photograph. Choosing a broker naturally requires an assessment of third party risk.
Broker commissions are generally around one per cent but higher volumes attract discounts. Trading online in gold contracts is likely to take off as the price of the precious metal increases and particularly if there is another big price hike later this year as experts like Jim Sinclair predict.
Such speculation around the gold price is to be expected in a price boom. But trading carries a heavy risk, especially with margin. Indeed, it is the equivalent of property flipping in a real estate boom, and while very profitable early on will eventually turn toxic.
Then gold coins will still have residual value while paper gold contracts will expire worthless.
