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DUBAI: A new generation of investors in the UAE is dabbling in gold – but they’re not buying jewelry in the process. In fact, they likely won’t even see the gold they’re buying.
That’s what ‘DigiGold’ is all about – investors buying by the gram for as little as Dh100. They don’t take possession of the gold they buy, but “store it” elsewhere in their name. When they feel the time is right, they can sell their gold “holdings” at a time of their choice – and more and more investors are looking at DigiGold as an option these days.
“These investors would never have thought of any exposure to gold five or six years ago,” said one commodities analyst. These are the ‘post-Covid’ investors in gold.”
On Friday (January 21), the price of gold in the UAE hit the highest point of the year at 22K Dh216 per gram. The international gold price is at $1,926 an ounce after reaching $1,936 in the past 24 hours. Gold is up 20% since November.
In just the past 30 days, the price of gold by the ounce has risen by $138.
Malabar poised to enter DigiGold — and so are other retailers
“Gold has been a stable asset since Covid,” said Shamlal Ahamed, managing director of international operations at Malabar Gold & Diamonds. The company plans to offer Indian investors the DigiGold investment option by mid-February 2023, after which it will The same extends to operations in the UAE and the Gulf.
“Currently, there are only two companies offering DigiGold investments in the UAE and we plan to join them soon. New investors need new ways to get into gold – and we have found that DigiGold can generate considerable interest.
In the B2B field, ETF (Exchange Traded Fund) is a tool for institutions to continuously increase their gold holdings. DigiGold will soon offer the same option on the B2C side
– Shamlal Ahamad, Managing Director International, Malabar Gold & Diamonds
“This doesn’t mean shoppers are focusing on jewelry and that physical holdings of gold are going to decline. But we want to offer all options — gold investments stored elsewhere are in vogue.” (Global consultancy Accenture Advised Malabar Gold & Diamonds on this program.)
Two other leading retailers confirmed their possible foray into DigiGold as well. “We can offer a minimum investment of Dh100 or buy Dh1 gram,” said a source. “This year will create more awareness among UAE consumers of DigiGold as a fail-safe investment option.
“We’re seeing many consumers struggling to save enough money to buy jewelry because of high gold prices. With DigiGold, they can invest in small batches and then add grams on a regular basis.”
More gold investment options
In recent weeks, more options have opened up in the UAE on how best to capture the value gains that gold has recorded since January 2020. Since then, gold has twice hit an all-time high above $2,000 (UAE gold peaked at Dh235 a gram at 22K).
Some financial institutions offer “gold loans” to business owners and individuals in lieu of their gold holdings. Because of the collateral involved, these gold loans carry lower interest rates than typical bank loans — which is important in times of high interest rates like the current one.
The environment remains positive for gold, but a correction may be healthy considering it has now rebounded almost 20% from its early November lows and is just over 6% from its all-time high.
– Craig Erlam, Senior Market Analyst, Oanda
“Businesses and individuals are becoming more innovative in harnessing the power of gold,” said one analyst. “For too long, it was seen as a safe haven that offered nothing between the actual buying and selling. That’s not the case anymore.”
If gold loans and the DigiGold scheme catch on among corporate and individual investors, the message will filter through.
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