Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a hedge or safe haven against any economic, political, social or currency-based crises. Investment in gold can be done directly through bullion or coin ownership, or indirectly through gold exchange-traded funds, certificates, accounts, spread betting, derivatives or shares.
Investors generally buy gold for two main reasons: because of the perception that gold prices will rise and thus that they can gain financially, and/or as a hedge or a perceived safe haven against any economic, political, social or currency-based crises. While prices may rise or fall, in recent years, Gold has outperformed the stock market. In fact, over the past 10 years, gold has quadrupled.
But that is the problem with owning gold bars. How do you hide them? Clearly wondering around the airport with them is not a good idea. Under the bed? What about the maid? Bury them in the garden? Are you even sure that they are gold bars? Gold-plated tungsten has the same weight, so be sure to melt them down occasionally just to be certain, they might have been switched.
It is all very well owning a few items of jewelry and storing them in a modest safe to avert the evil eye. But if you are investing thousands or millions of dollars in gold then you need to adopt a more sophisticated approach.
The Dubai Gold Securities exchange traded fund is the perfect local solution. You get a certificate for one-tenth of an ounce of gold which is held against physical gold in a London depository run by HSBC.
Even though some people worry about and whether they would be redeemable in an Armageddon disaster situation, ETFs are still an alternative chance of investing in gold.
Exchange Traded Fund (definition by www.investorwords.com). A fund that tracks an index, but can be traded like a stock. ETFs always bundle together the securities that are in an index; they never track actively managed mutual fund portfolios (because most actively managed funds only disclose their holdings a few times a year, so the ETF would not know when to adjust its holdings most of the time). Investors can do just about anything with an ETF that they can do with a normal stock, such as short selling. Because ETFs are traded on stock exchanges, they can be bought and sold at any time during the day (unlike most mutual funds). Their price will fluctuate from moment to moment, just like any other stock’s price, and an investor will need a broker in order to purchase them, which means that he/she will have to pay a commission. On the plus side, ETFs are more tax-efficient than normal mutual funds, and since they track indexes they have very low operating and transaction costs associated with them. There are no sales loads or investment minimums required to purchase an ETF. The first ETF created was the Standard and Poor’s Deposit Receipt (SPDR, pronounced “Spider”) in 1993. SPDRs gave investors an easy way to track the S&P 500 without buying an index fund, and they soon become quite popular.
Dubai has historically been an international hub for the physical trade of gold.
Amazing facts about Gold in Dubai (source: http://www.dubaicityofgold.com)
. Per capita gold bought every year of 34 grammes, more than an ounce (31.1g), is the highest in the world
. More than two thirds of the population buys gold at least once a year
. 48% of all gold is for gifting
. 28% is for self
. 95% of all tourists buy gold
. On an average every person buys five pieces of gold jewellery every year
. Each piece is worth $400 on average, so the average yearly spend is $2,000
. 76% of all Dubai residents own gold
. 80% intend to buy gold in the next year
. 90% of the jewellery market is plain gold jewellery (as against 10% gemset)
. 90% of all jewellery in Dubai is imported
. Imports come from Saudi, India, Pakistan, Thailand, Italy, Malaysia, Singapore, Bahrain
. Dubai is the Middle East supply hub for the jewellery market.
. 95% of all jewellery sold is above 21 karat; the rest is 18 karat
. Dubai has over 600 shops, the densest concentration in the world
. Dubai’s Gold Souk has 275-plus shops in a half a square kilometre area.
. At any given time over 25 tonnes of gold is on display in jewellery shop windows
. Jewellery is sold on gold price plus making charges unlike in the West, where it is per piece
. Dubai is the world’s second largest redistributor of bullion; it imports 360 tonnes and re-exports almost all of it (350 tonnes)
. Dubai made the world’s longest gold chain during DSF 99. The chain was made in 22k gold and measured 4.2kms. 9,600 people bought the chain in neckwear and bracelet size pieces.
Gold Souk Times
Saturday to Thursday
9.30 am to 1.00 pm
4.30 pm to 10 pm
9.30 am to 11.30 am (only for some jewellers)
4.30 pm to 10 pm
But of course you also have the problem of carrying them to your country..
Dubai Police apprehended the suspects in a daring $1.6 million gold heist in the Dubai International Airport within 48 hours late last month. This case highlights the security issues surrounding gold ownership, and for local investors points to the usefulness of exchange traded funds to own gold.
The Dubai airport heist was no daring daylight raid by armed men. Rather a jeweler with 25 gold bars in his luggage was tracked by a gang who walked off with his suitcase when he put it down and looked away. Apparently they had learned of his insecure gold carrying habit, and for good measure immediately sent the booty to Costa Rica via a courier service, hidden in electronic equipment. The jeweler did not see a thing but the Dubai Police has far a very modern and effective security system that came to the rescue.
Keep gold safe
Yet how likely is that, or that the third parties fail, although again DGS says that even this would make no difference to the holder’s entitlement. Surely you are far more likely to be robbed like the jeweler in Dubai airport if you insist on holding physical gold.
An alternative is the Perth Mint Depository System in Australia from a AAA-rated, 100 per cent government owned institution, which charges nothing for storage of unallocated gold and no commission for buying and selling it.
The place to keep gold is in a vault, don’t carry it around in your luggage!