As Dubai gold rate sticks to record high, should investors switch to banks' 'gold accounts'?

Dubai: As the Dubai gold rate sticks to peak Dh383 a gram for 22K levels, leading banks in the UAE are pressing hard on having retail customers sign up for ‘gold accounts’. Their sales pitch is straight forward – invest in ‘pure’ gold and make best use of prospects where prices will likely go up more.

So, there is a direct contest for investors’ funds that banks believe would otherwise have gone into buying gold jewellery. Banking sources say they are seeing more of their ‘traditional’ retail account holders add a gold investment account seeing how the precious metal has been faring so far this year.

As of mid-June, gold prices have climbed by over 6% compared to a month ago. And by nearly 50% from a year ago.

“We are telling customers that they could consider setting up gold accounts and get more for their funds,” said a banker. “As compared to what they have to spend extra on gold jewellery making charges.”

Making charges on gold jewellery are featuring more as a factor these days when buyers are considering making an 'investment'. If the making charges add up to a few dirhams on a per gram basis, many investors do want to avoid that.

This is where gold accounts come in, whether that's through banks or trading platforms. Emirates NBD's app says to 'start small' and 'top up your investment every month - watch your gold grow'. The Dubai bank requires a minimum investment of Dh500 for the gold account. Add to the account 'whenever you want to' or start a 'systematic investment plan to buy small units of gold every month'.

RAKBank offers accounts to help investors 'save in grams'. "This means you can easily build savings in gold without having to purchase a large amount at once," according to the bank's website.

Now, banks offering investment options linked to gold is not new. What's changing is the extra emphasis that the banks are giving to this part of their retail client offering.

"You have standalone investment and trading platforms that's been popular with younger investors," said an analyst. "And you have the banks who have existing clients and whom they could convince to take up gold accounts too. These clients typically prefer dealing with an entity they know rather than sign up with a new platform.

"At the end of the day, it's all about getting more investors turn to gold."

A new wave of investors are taking to gold

“Financial fragmentation has increased the appetite for both gold and bitcoin. Investors in the UAE are not just buying these assets as a 'hedge' - in a more polarised political world there is also a practical use.

"Hence even though US yields remain high, the historical correlation of lower 'safe haven' prices has broken.

"On a grams per person basis, the UAE consumer buys more gold than anyone else globally, something which is reflected in our customer flow at IG MENA.”

- Sharaz Hussain, Senior Executive Office for IG MENA