x Abu Dhabi, UAEWednesday 24 January 2018

Emirates NBD offers gold investment opportunity

A chance to profit as trading price soars, with other precious metals also under consideration.

Emirates NBD has joined the global rush for investment products that will allow investors to store gold as a permanent part of their portfolio without the inconvenience of owning a bank vault.

Savers will be able to buy certificates for gold bars in denominations of 500 grams, currently valued at about US$23,000 (Dh84,478) by walking into any of the bank's branches.

Unlike some means of investing in gold, such as through derivatives or an exchange-traded fund available in other markets, the gold certificates are used to purchase physical bars that are held in storage by the bank's security firm, Transguard Group.

"Gold has been gaining traction all over the world and we think it's an important investment for clients to be in," said Jamal bin Ghalaita, the deputy chief executive of Emirates NBD. He stopped short of revealing how much the bank expected to buy and sell on behalf of customers.

There is no limit on how much the bank is able to trade, as it depends on customers' requirements, the bank said. However, in a soft launch of the service customers bought and sold up to 50kg per day.

The initiative could further increase the soaring price of gold, which hit a record US$1,431.25 on Tuesday. A recent report by Goldman Sachs indicated it would continue to soar next year.

"We continue to expect gold prices to climb to $1,690 per troy ounce in the next 12 months, as the resumption of quantitative easing will keep US real interest rates low," said the report.

The bank hopes it will be able to access more favourable rates than buying the gold directly or through a broker.

Mr Ghalaita said he expected "buoyant" demand for the service, adding that the bank was aiming to increase its commodity offerings to meet demand.

Gold may soon by joined by other precious metals, he said, such as silver and platinum, then base metals that could include copper, nickel and tin.

"We'll look at all the metals. We first have to do a good job on gold and then move for another metal," he said.

Mr Ghalaita also indicated the bank was considering issuing certificates allowing investors to purchase stocks of oil in the same manner.

"The UAE market continues to contribute about 20 per cent of world demand," said Asif Lakhany, the head of international and new ventures at Emirates NBD.

"People are still wanting to participate in this market but they feel more value in investment products than traditional jewellery," he said, adding that investment products had grown to account for 40 per cent of demand.

The total gold trade through Dubai was worth US$29 billion (Dh106.51bn) last year, according to the Dubai Multi Commodities Centre.

However, Dalton Garis, the associate professor of economics and petroleum market behaviour at the Petroleum Institute, said such products were a "terrible idea" that would take money out of the economy at its time of need.

"When you buy gold in any way and stick it under the bed, it's basically stealing from the economy and taking out the blood that it needs to move things around," he said.

Purchasing commodities other than precious metals through exchange-traded funds or certificates could be more useful to the economy, he said.

"If you're increasing the number of persons who are willing to give money to invest in food commodities or oil, it will find value faster and there's more money out there to do things."

More investors holding food, base metals or energy could also prevent the market from being cornered by a single trader, he said.

Robin Bhar, a metals analyst at Credit Agricole CIB, said that physically buying and storing oil would present much more of a challenge to Emirates NBD than storing gold.

"It's fairly easy to store metals," he said. Oil, however, "would be beyond imagination".