New 5oz Khalifa bullion coin issued by Dubai as gold trade booms

A five-ounce bullion coin featuring the President of the UAE, His Highness Sheikh Khalifa bin Zayed Al Nahyan has been unveiled by the Dubai Multi Commodities Centre as the importance of gold to the future of the emirates as a trading hub is recognized and much higher prices seem imminent.

The DMCC is hoping its weighty coin will appeal to serious investors at AED30,000 a piece. Its earlier smaller coins baring the face of Dubai Ruler and UAE Prime Minister, Sheikh Mohammed bin Rashid Al Maktoum were not a great success.

Gold coin demand

However, gold and silver coins are increasingly popular around the world among investors. The premium over the spot metal price is usually higher than bullion bars for storage in bank vaults. But coins are easy to transport and trade as a certified money with no central bank to devalue them.

Ironically though the DMCC is now in talks with the UAE Central Bank to get the new ‘Khalifa’ bullion designated as the first gold bullion legal tender in the Middle East. This would give the coins the status of the British sovereign or South African kruggerand gold coins.

Gold was the UAE’s biggest traded commodity after oil in the first half of 2011, and accounted for the lion’s share of a big jump in Dubai trade. Dubai has long been known as ‘The City of Gold’, particularly serving the insatiable demand for gold from India where traditional weddings require a bidal dowry of gold.

The demand for precious metals has surged in August, driving the price over $1,800 an ounce for the first time. Gold sales ran at seven times average annual demand levels in the first few days of the month, and then the price corrected as we saw in the silver market in April.

Parabolic spike?

That is the normal pattern for a rising market, with surges and corrections. However, senior market analysts like Jim Sinclair hold that gold is now about to enter a period of parabolic price rises once its price holds above $1,754 (click here).

Indeed, from a technical perspective the gold price left its 200-day moving average behind at $1,500 and can be considered to already be in the early stages of a spectacular price spike. Silver may still outperform gold (click here).

That could take gold way past the $5,000 an ounce mark that looked fantastic when the editor of this website wrote his book ‘Dubai Sabbatical: The Road to $5,000 Gold’ three years ago, though silver could well still do even better as this website has argued many times (click here).