Shariah-compliant gold shares to be listed on Dubai bourse

April 7th, 2008 - 9:16 pm ICT by admin  

Dubai, April 7 (IANS) Dubai Multi Commodities Centre (DMCC), a tax-free zone authority of the emirate, Monday announced a joint venture (JV) with the World Gold Council (WGC) to launch fully Islamic finance or Shariah-compliant gold shares with the intent to list them on the Dubai International Financial Exchange (DIFX). The listing will be subject to approval by the Dubai Financial Services Authority (DFSA) for a trading symbol GOLD, according to a DMCC statement.

“Dubai Gold Shares will bring about increased transparency in Dubai’s gold markets, and will give a significant boost to the emirate’s position as a leading financial centre,” DMCC executive chairman Ahmed Bin Sulayem said in the statement.

“More importantly, it will ensure greater integration between the physical and financial markets and will meet the increased investor appetite for gold,” he added.

DMCC aims to operate and manage this initiative through Dubai Commodities Asset Management (DCAM), a 100 percent DMCC-owned United Arab Emirates (UAE)-based investment company, set up last month.

DCAM has been established to develop and seed commodity-linked investment products for distribution in the UAE and other markets, according to the statement.

DCAM and the WGC will establish a JV company called Dubai Gold Investments-DMCC ahead of launching the Dubai Gold Shares.

The gold shares will form an integral part of the exchange traded gold (ETG) family of products, established as a result of an initiative by the WGC.

“It is the long-term mission of exchange traded gold, supported by the World Gold Council, to remove the barriers to investing in gold across the globe,” WGC chief executive James Burton said.

“Our partnership with the DMCC brings together our collective strengths to allow institutions and individuals seeking Shariah-compliant financial products a simple, secure and efficient method of accessing physical gold without having to compromise on their Islamic principles,” he said.

Gold held by products in the ETG stable now exceeds $24.2 billion, or 806 tonnes as of March 31 this year and represents more than 86 percent share of the market for this category of security, the DMCC statement said.

Securities within the ETG family are currently listed on the London, New York, Johannesburg and Australian stock exchanges, with secondary listings in Mexico, Singapore, Euronext Paris, Deutsche Boerse and on Borsa Italiana.

Dubai Gold Shares will be the first dollar-priced security of its kind to be fully Shariah-compliant.

The physical gold bars backing the product will be of Dubai and London Good Delivery Standard, and held in the vaults of the custodian, DMCC, and sub-custodian, HSBC.

To ensure that Dubai Gold Shares are wholly Shariah-compliant, WGC and DMCC have retained Shariah Capital as Shariah advisor.

These shares will provide investors with secure, low-cost access to owning gold bullion without the additional costs normally associated with insuring, storing and transacting in physical gold.

Each security will allow investors to gain exposure to precise amounts of specifically identified and exclusively-owned gold bullion, and provides investors, for the first time, with the opportunity to trade holdings in gold bullion on the DIFX in a Shariah-compliant manner.

“Dubai is well known as a major hub and a strong local physical gold market. The total gold imports for the year 2007 reached 559 tonnes,” Moaz Barakat, WGC’s managing director for the Middle East, Turkey and Pakistan, said.

“We believe that this product will attract investors from all over the world and specifically from Islamic countries,” he added.

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