The Nasdaq Dubai and World Gold Council launched its long awaited gold exchange traded fund today, which is both Shariah compliant for Islamic investors and 100 per cent backed by physical gold.
‘This is not a derivative product because it is 100 per cent backed by allocated gold held in London vaults by HSBC, and audited both by traditional and shariah auditors,’ CEO of the WGC Aram Shishmanian told ArabianMoney.Net.
He said it was important to understand the difference between unallocated and allocated gold. ‘The Dubai ETF has allocated gold, so there is no third party between the metal and its owner. The ETF certificate is an entitlement to one-tenth of an ounce of gold.’
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Trading under the ticker symbol GOLD, the new ETF is the first new launch on the Nasdaq Dubai this year, and the one-time 60 basis point charge is exactly the same as other existing ETFs.
Will this make the Dubai ETF sufficiently different to attract regional investors who already have the exchanges of the world at their finger tips?
‘We have launched a series of ETFs around the world and have always found that a regional product stimulates new demand,’ said Simon Village, executive director of Dubai Commodities Asset Management.
Dubai is a logical choice for the ETF as the financial hub of the Middle East and the regional ‘City of Gold’, handling around 20 per cent of the world’s trade in physical metal.
‘It is an opportune time to launch in Dubai,’ said Mr. Shishmanian. ‘There is substantial latent demand from investors. Gold is a safe haven and protection against inflation and a weaker US dollar as well as a risk mitigator for investment portfolios.
‘Gold and bonds are the only asset classes to show a positive performance in the past 12 months. We are seeing a structural shift in gold as an investment immune from third party failures at a time of systemic risk in the financial sector.’
Only time will tell how GOLD on the Nasdaq Dubai is received but this regionally tailored product is likely to be considered as a low cost method of diversifying local portfolios at a time when very few asset classes offer much upside potential.