How To Invest in Gold in UAE: 4 Ways To Invest in Gold

Written by:

Mohamed Hafiz

Date:

May 1, 2024

Table of Content

Investing in gold within the United Arab Emirates (UAE) presents a promising opportunity for investors, particularly when considering the precious metal’s impressive track record in 2023. Gold prices rose 15% in 2023, reaching an all-time high of $2,078 an ounce. The surge was driven by strong demand from emerging markets and central banks and ongoing geopolitical risks. Together, these factors make gold one of the best-performing assets of the year.

Here are four practical and profitable ways to invest in gold in the UAE, for investors aiming to leverage the dynamic and rewarding UAE gold landscape.

How To Invest in Gold in UAE?

Investing in Physical Gold

I recommend purchasing actual gold bars or coins when investing in physical gold. It’s a smart way to diversify your investment portfolio and safeguard wealth. Physical gold holds its value over time and can help guard against economic uncertainty. There are three main types of physical gold investments: bullion, coins, and jewelry.

Bullion

Investing in gold bullion remains a popular choice. Gold bars are available in various sizes, but one- and 10-ounce bars are most common. The current price of gold per ounce in the UAE is 7316.5 AED (as of December 12, 2023). Over the past month, the price has fluctuated, hitting a low of 7,119.2 AED and reaching a high of 7,609.8 AED.

Investing in physical gold requires a significant amount, and I recommend using a trustworthy dealer. Secure storage, whether in a vault or a safe deposit box, is also essential due to the value of the gold.

If you decide to invest in gold bullion, be aware of the current price of gold so that you can choose the right time to buy; remember that most dealers update their prices based on current spot prices.

Coin

Investing in gold coins, such as UAE bullion coins, which showcase the country’s heritage, is popular in the UAE. Available in various sizes, including one and two ounces, these coins are sometimes sold for more than their gold content due to their collectability.

Investors in the UAE can explore local markets for competitive deals, but I would advise buying from reputable, licensed dealers to ensure authenticity and a fair price.

Jewelry

Investment in wearable items such as gold jewelry is typical in the UAE. However, gold jewelry as an investment comes with certain risks.

First, you should be careful when purchasing jewelry, especially second-hand jewelry, as not all sellers are reputable. To mitigate this situation, I advise purchasing from reputable dealers, ensuring you receive complete documentation.

In addition, the cost of jewelry will include a premium, depending on the development company and manufacturer, ranging from 20% to more than three times the cost of raw materials of the precious metal.

Understanding the purity of jewelry is also vital. The purity of gold is measured in karats, with 24 karats being 100% gold. Lower purity levels reduce a piece’s smelting value, indicating its components’ raw value when smelted into pure gold.

Gold Exchange Traded Funds (ETFs)

Investing in Gold ETFs in the UAE offers an alternative to physical gold, combining the stability of gold with the liquidity and diversification of ETFs. However, according to Invesco, in Q2 2023, gold ETF holdings dropped by 0.6%, paralleling a 2.5% decrease in gold prices. In late 2022, the usual link between gold prices and ETF holdings changed. This shift might be because investors started preferring to keep physical gold in their local areas, possibly due to Russian sanctions.

There are two types of gold funds that I want to speak about:

  • Passively Managed ETFs:

Example: Consider ETFs like iShares Gold ETF (IGLN) that track gold prices using futures or options.

  • Actively Managed Mutual Funds:

Example: Explore actively managed funds like Emirates NBD Gold and Precious Metals Fund, where professional investors aim to outperform index funds.

While ETFs like the Emirates Gold ETF (EGETF) may hold physical gold, others, like the Abu Dhabi Precious Metals Fund, might track a basket of stocks from gold mining companies.

Gold Stocks

When it comes to investing in the UAE, considering shares in companies involved in gold mining, processing, and trading may be an easier option than purchasing physical gold. This involves buying shares of gold mining companies through your brokerage account.
Here are the gold mining companies I prefer most as an investment manager:

Emirates Gold Mining Co. (EGMC): Emirates Gold, founded in 1992 and based in Dubai, UAE, is a significant player in the gold and silver market. As one of the largest refineries in the Middle East, they produce their own bullion, including 995 and 999.9 purity kilobars, investment bars, and customized coins.

Kaloti Precious Metals: Founded in 1988, has grown significantly to become a globally integrated precious metals services firm. As of 2011, the company handled 40% of Dubai’s gold imports and 25% of the city’s gold turnover. They refine an impressive 1,400 tons of gold annually in their Dubai and Sharjah refineries. Kaloti’s expansion includes offices in six countries and a wide range of services like assaying, refining, minting, financing, and trading in gold, silver, and platinum.

PAMP Gold LLC: PAMP Gold LLC in Dubai is a prominent player in the precious metals industry. Known for their high-quality gold products, they offer a comprehensive production and delivery service. The company, established in 1977, is recognized globally as a leading bullion brand and trusted refiner and fabricator of precious metals.

Investing in gold stocks is similar to other stocks. They’re tied to gold prices and affected by each company’s performance. Individual stocks can be volatile, so think about diversified funds for more security.

Gold Options and Futures

Gold options and futures are advanced trading options best suited for those with experience in the financial markets due to their complexity and high risks.

With gold options, you can buy or sell gold at a future price but aren’t obligated to do so, allowing for speculative investments with controlled risk.

Futures contracts, on the other hand, require buying or selling gold at a predetermined price on a set date, and they carry a higher risk with the potential for significant gains or losses.

As these instruments are influenced by market volatility and geopolitical events, I recommend thorough research and possibly consulting a investment company before investing in them. They are well-suited for investors looking to hedge risks or capitalize on gold market fluctuations.

Key Considerations When Investing in Gold

When I think about investing in gold, I know it’s not just about making a quick buck. It’s a journey that requires a lot of thought and strategy. Let me share some key factors that I always keep in mind:

  • Understanding the purpose of your investment

First, I ask myself: “Why am I investing in gold?” Is this a hedge against market fluctuations, or am I in this for the potential long-term growth? This decision is critical because it determines my entire investment approach. I also consider my goals: am I looking for immediate gains, or is this a long-term play for my financial future?

  • Market Timing and Analysis for Optimal Investment

Additionally, there is the issue of timing and market analysis. It is essential to monitor gold market trends and global economic indicators. I’m always looking to buy low and sell high, but I admit that predicting market movements can be a real mystery.

  • Get Expert Advice

I have found that expert advice is invaluable, especially since I am not an experienced gold investor. Consulting with financial advisors or investment experts provides me with insight that is appropriate to my financial situation and goals.

  • Ensure Safe Keeping

And let’s not forget about safety. If I’m investing in physical gold, I need to think about safe storage – a home safe or a safe deposit box. Additionally, insuring my gold investments is a must, especially if I own a significant amount.

Professional Guidance and Support in Gold Investment

Remember that before investing in gold, you need professional advice from experts who can significantly improve your decision-making process and achieve investment success. Professional advisors offer insight into market trends, risks, and opportunities. They can develop customized investment strategies to suit individual financial goals. Additionally, their expertise in regulatory compliance ensures that your investment practices comply with local laws and regulations.

Many investment advisors in the UAE specialize in gold investments. For example, I recommend Rama Vision, which can help you with all types of investments using an AI-based tool. These professionals provide services ranging from market analysis to portfolio management.

Conclusion

I can clearly say that the UAE gold market offers a unique combination of traditional charm and modern innovation, making it an attractive destination for gold investors. Its diverse options, from historical gold markets to cutting-edge AI-powered platforms, cater to the interests of all types of investors. For those looking to get into gold investing, the UAE presents a promising opportunity, balancing the timeless value of gold with the benefits of a promising market.