Dubai: A new generation of investors in the UAE are getting into gold – but they are not buying up jewellery in the process. In fact, chances are they will not even be seeing the gold they are buying.
That’s what ‘DigiGold’ is all about – where investors buy in grams starting from as low as Dh100. And they do not take possession of the gold they bought, with the ‘storage’ done under their name elsewhere. When they feel the time is right, they can sell their gold ‘holdings’ at a time they choose – these days there are more investors thinking of DigiGold as the option.
“These are investors who would never have thought of any gold exposure five or six years ago,” said according to a commodities analyst. “They are typically in 25-30/35 age group, don’t much care for jewellery, and only came into gold because how the asset has been performing since January 2020. These are the ‘post-Covid’ investors in gold.”
On Friday (January 21), the UAE gold rate has touched its highest point of the year, at Dh216 a gram for 22K. The international bullion price is at $1,926 an ounce after having reached $1,936 in the last 24 hours. Since November, gold is up 20 per cent.
Just in the last 30 days, gold is up by $138 in ounce terms.
Malabar set to enter DigiGold – other retailer too
“Since Covid, gold has been the one asset that’s been performing consistently,” said Shamlal Ahamed, Managing Director – International Operations at Malabar Gold & Diamonds, which plans to offer DigiGold investment options to investors in India by mid-2-2023 and then extend the same to UAE and Gulf operations.
“Currently, there are only two players offering DigiGold investments in the UAE and we plan to join them soon. New investors need new ways of getting into gold – and we find that DigiGold can generate a sizeable level of interest.
In the B2B space, ETFs (Exchange Traded Funds) are the vehicles for institutions to keep adding to their gold holding. DigiGold will soon offer the same option when it comes to B2C
“This does not mean that shoppers focus on jewellery and physical possession of gold will come down. But we want to offer all options – and investing in gold with storage being done elsewhere is catching on.” (The global consultancy Accenture is advising Malabar Gold & Diamonds on this plan.)
Two other leading retailers confirm they are also likely to venture into DigiGold. “We could offer either Dh100 minimum investment or buying Dh1 gram,” said a source. “More awareness will build among UAE consumers up on DigiGold as a fail-safe investment option this year.
“We see that many consumers because of the high gold prices currently struggle with saving enough and then buy jewellery. With DigiGold, they can make investments in smaller lots and then add to their grams regularly.”
More investment options on gold
In recent weeks, more options are opening up in the UAE on how best to capture the value gains gold has been recording since January 2020. Since then, gold has twice touched record highs of $2,000 plus (the peak UAE gold rate has been Dh235 a gram for 22K).
Some financial institutions are offering ‘gold loans’ to business owners and individuals in lieu of their gold assets. Because of the collateral involved, these gold loans come at lower interest rates than the typical bank loans – and that counts in a high interest rate situation such as the present.
The environment remains favourable for gold but a correction could be healthy considering it’s now rallied almost 20% from its early November lows and sits a little over 6% from all-time highs.
“Businesses and individuals are becoming more innovative in tapping gold’s power,” said an analyst. “Too long, it was seen as being a safe haven and not offering anything between the actual buying and the selling. It’s not the case anymore.”
If the gold loan and DigiGold schemes catch fire with businesses and individual investors, that message will have filtered through.