Is UAE moving to have greater transparency on gold buying, selling on digital platforms?

March 5, 2024

Dubai: Moves are on to bring in greater transparency and ethical conduct in consumers buying gold in the UAE, particularly those done via online investment platforms. Doing so would help consumers make better informed decisions about what they are buying into and the entity that’s doing the selling, according to a top official at World Gold Council.

It was in January that WGC – which is setting up a Middle East office in JLT – launched a global poll, including in the UAE, and which found that consumers found ‘lack of trust to be a key barrier’ in the transaction process, said Andrew Naylor, Head of Middle East and Public Policy at World Gold Council.

“This is because of the proliferation of digital platforms that are offering consumers a chance to invest in gold,’ said Naylor. “The problem lies if the selling platform doesn’t have the physical gold with them to back the investment – even though there is no gold changing hands.

“But can investors be absolutely sure these platforms do have that gold in hand when a subsequent sale happens?”

Already, the tightening up of buying gold through digital channels has been tightened up in markets such as Germany and the UK. The WGC is working with local authorities where possible to expand the scope of this code of conduct in retail channels.

In the UAE, with gold prices running high over these three years, investments via digital channels have been on the rise. Essentially, these allow investors access to a certain weight of gold, and which can then be sold once they find favourable conditions to do so. Mostly this is done on the premise that the platform ‘holds’ the same amount in gold transacted with the seller.

Stock-Andrew-Naylor — Andrew Naylor of World Gold Council: “Increased transparency will benefit the entire gold retail marketplace.” The WGC is working with local authorities to bring in best practices to the trade.

High networth buyers

The need for greater transparency assumes importance as more UAE-based high networth individuals place their funds in gold bars and coins.

“A new base of investors in the UAE and family offices are placing greater allocations on the metal,” said Naylor “The UAE gold market is not just about gold jewellery alone, with bars and coin demand taking on higher volumes.

“If there is increased transparency in the transactions, it will benefit the while precious metals market in the UAE. Because this market is already globally known for the purity of the gold sold via retail and other channels.”

The World Gold Council has once again set up base in Dubai, just over 10 years after it shut down its earlier presence after the 2009 Global Financial Crisis. Naylor sees a renewed opportunity to work closely with the authorities at a time when the UAE has emerged among the Top 5 global markets in the handling of physical gold.

“On average, the UAE handles about 1,500 tonnes a year, but we see that increasing and more opportunities getting created,” the official added.

“That means, there is an opportunity for more UAE banks to get active in this space, helped by developments such as the UAE-India CEPA deal or the latest development related to the UAE exiting the FATF grey list.

“Beyond gold or jewellery trade finance, UAE banks could get into more specialised areas such as project finance, opening bank accounts, and all of which get to backed by gold. There is much more that gold can provide businesses and investors.”

Currently, with gold again hitting levels of $2,100 an ounce plus, the possibilities sure have opened up further.

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