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DGCX launches new physical gold futures and spot gold contracts

Traders, brokers, banks and financial institutions across the Middle East and India set to benefit from access to liquidity sources through the DGCX trading platform

Dubai Gold and Commodities Exchange (DGCX) has announced the launch of new Physical Gold Futures and Spot Gold Contracts as it continues its strategic goal of becoming the de facto gold pricing standard in the region.

The launch of the two products provides traders and financial institutions the ability to use physical gold as collateral to access affordable sources of short-term lending, backed by the guarantee provided through the exchange clearing house acting as central counterparty.

The products are designed such that they can be used together by traders, similar to a repurchase agreement (Repo), to get short-term liquidity from banks through the spot gold markets while opposite physical future trade is done at the same time for the trader to receive their gold back and the bank to get their funds. The products are available now for trading.

“Over the last year, gold has become a solid top tier asset class globally as banks have increasingly started to accept it as collateral from traders and institutions looking for liquidity in the markets. The UAE is a regional financial hub and commodities trading, especially gold, is a crucial asset driving volumes in the markets," Ahmed bin Sulayem, CEO of DGCX, said.

"By launching new physical gold futures and spot gold contracts, we are offering greater choice to participants that operate in the commodities market. The move, which offers tremendous potential for traders, brokers, banks and financial institutions, reflects our commitment to continuously facilitate access to high-quality products and services for our members,” he said.

The first transaction

DGCX also announced that the first transaction was successfully completed between DGCX member, Paloma Precious DMCC, and one of the most reputable banks in the UAE as it became the first trader to benefit from access to short term liquidity using the newly launched products. The physical gold bars changing hands in this transaction are 'Emirates Gold' which are part of the UAE Good Delivery standard.

Ahmed bin Sulayem added: “We are delighted to have successfully closed the first transaction for the newly launched products. The transaction highlights the nature of products we are bringing to the markets – relevant, innovative and highly accessible to key market participants. We expect more such transactions with banks and financial institutions as we continue to bring products that can provide liquidity for traders to the markets.”

Both the newly launched products can be traded on the DGCX EOS Trader platform, where traders manage risk, protect value and grow portfolios by buying and selling commodity and currency derivatives.

Gold that is delivered under the Spot Gold Contract shall be of a fineness of 995.0 parts per thousand and be of “UAE Good Delivery” quality specification within the chain of custody, as determined by DMCC. The DGCX clearing house acts as the central counterparty to all transactions. This continues the UAE’s commitment to embedding the very highest international gold standards into the region.

The introduction of Physical Gold Futures and Spot Gold Contracts follows the signing of a Memorandum of Understanding (MoU) and an Agreement between DGCX and FinMet Pte Ltd, a precious metals’ technology trading, training and logistics provider. DGCX and FinMet will work together to educate the market and identify more trading opportunities in the gold markets, onboarding banks and new members that are seeking diversity in products for their business needs.

— muzaffarrizvi@khaleejtimes.com