The Dubai Gold and Commodities Exchange (DGCX), a UAE derivatives bourse, has decided to launch the first-ever Sharia compliant Spot Gold contract in the Middle East along with Saudi Ayedh Dejem Group, demonstrating its interest in gold futures. This follows the global launch of its DGCX Shanghai Gold Futures in April.
Trading in the Muslim-majority Middle East must be compliant with Sharia law. This means that swaps are highly restricted for trading in this region.
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By overcoming such hurdles and introducing Sharia compliant gold futures, the DGCX hopes to capitalize on the growing demand for gold from Saudi Arabia, which has been measured at between 60 tons to 85 tons. This accounts for 30% of regional demand.
Gaurang Desai, Chief Executive Officer of the DGCX, said: “We are looking at this product to develop local markets and unlock the potential of Gold trading in the region. We continually look to work with partners that allow us to capitalize on these opportunities. We are delighted to collaborate with the Ayedh Dejem Group as we believe the new Spot Gold contract will encourage new and existing institutional participants to invest and trade in Sharia compliant products. As the largest derivatives bourse in the Middle East, we are confident of the product’s success and establishing more such partnerships and launching additional products in the future.”
With this move, the DGCX hopes to attract institutional investors, fund managers and large traders who allocate part of their investments in gold as a means of offsetting global risk. They can make use of these Sharia-compliant gold futures for this purpose.