DGCX to launch region’s first Shariah-compliant spot gold contract

Saudi Arabia’s gold demand is estimated between 60 and 85 tons, according to the World Gold Council. (Reuters)
Updated 19 August 2017
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DGCX to launch region’s first Shariah-compliant spot gold contract

DUBAI: The Dubai Gold and Commodities Exchange (DGCX) will develop and launch the region’s first Shariah-compliant spot gold contract as the precious metal is getting a bigger role on Islamic finance.
DGCX is partnering with Saudi conglomerate Ayedh Dejem Group to make the $7.5 trillion gold market more investable for the world’s 1.6 billion Muslims, who are limited by the type of gold instruments they are allowed to investments in due to Shariah restrictions.
“We are looking at this product to develop local markets and unlock the potential of gold trading in the region. We are delighted to collaborate with the Ayedh Dejem Group as we believe the new spot gold contract will encourage new and existing institutional participants to invest and trade in Shariah-compliant products,” said Gaurang Desai, the chief executive DGCX.
“Bringing Shariah-compliant products to a wider audience will continue to garner interest from the local populous as well as other global entities that are looking for a route into the newest and fastest growing sector of the mainstream financial markets.”
Shariah-compliant gold investments are now estimated to be worth $2 trillion, and the decision to launch the spot gold contract should further attract the interest of regional Islamic financial institutions and banks, DGCX said.
“We believe our partnership with DGCX supports our vision to enhance cross-border collaboration as it offers access to the regional gold and commodities market, providing customers with improved hedging and investment solutions in compliance with Shariah law,” said Ayedh Bin Dejem, the chairman for Ayedh Dejem Group.
Gold has traditionally played a minor role in Islamic finance because of uncertainty on what are religiously permissible investments on the precious metal, which in turn has slowed product development and constrained investor demand.
In December, Bahrain-based Accounting and Auditing Organization for Islamic Financial Institutions, working with the World Gold Council, came out with guidelines to clarify existing Islamic rulings on gold trading and make it easier to conduct complex transactions.
One of the rules called gold transactions to be fully backed by physical metal and settled on the same day to adhere to Islam’s distinction between real economic activity and speculation.


Oil prices rise after tanker attacks stoke Middle East tensions

Updated 40 min 8 sec ago
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Oil prices rise after tanker attacks stoke Middle East tensions

  • Second time in a month tankers have been attacked in the world’s most important zone for oil supplies
  • Washington blames Iran for Thursday’s attacks

TOKYO: Oil prices rose on Monday after US Secretary of State Mike Pompeo said Washington will take all actions necessary to guarantee safe navigation in the Middle East, as tensions mounted following attacks on tankers last week.
Brent futures had climbed 26 cents, or 0.4 percent, to $62.27 a barrel by 0314 GMT. They gained 1.1 percent on Friday.
US West Texas Intermediate (WTI) crude futures were up 17 cents, or 0.3 percent, at $52.68 a barrel. They rose 0.4 percent in the previous session.
Prices had jumped as much as 4.5 percent on Thursday after the attacks on two oil tankers near Iran and the Strait of Hormuz.
It was the second time in a month tankers have been attacked in the world’s most important zone for oil supplies as tensions increase between the United States and Iran. Washington blamed Iran for Thursday’s attacks, prompting a denial and criticism from Tehran.
“We don’t want war. We’ve done what we can to deter this,” Pompeo said in an interview with Fox News Sunday, adding: “The Iranians should understand very clearly that we will continue to take actions that deter Iran from engaging in this kind of behavior.”
Tensions between Iran and the United States have risen since US President Donald Trump pulled out of a deal last year between Iran and global powers that aimed to curb Tehran’s nuclear ambitions in exchange for sanctions relief.
Iran has repeatedly warned it would block the Strait of Hormuz if it cannot sell its oil because of US sanctions.
“Growing tensions in the Middle East remain a cause for concern as traders fear supply disruptions over an escalation toward militaristic conflicts,” said Benjamin Lu, an analyst at Phillip Futures in Singapore.
Also supporting prices were comments over the weekend by the Saudi energy minister, Khalid Al-Falih, that OPEC would probably meet in the first week of July and he hoped it would reach an agreement on extending oil output curbs.
“We are hoping that we will reach consensus to extend our agreement when we meet in two weeks time in Vienna,” Falih told reporters while attending a G20 energy and environment ministerial meeting in Karuizawa, northwest of Tokyo.
The Organization of the Petroleum Exporting Countries plus Russia and other producers, an alliance known as OPEC+, have a deal to cut output by 1.2 million barrels per day (bpd) from Jan. 1. The pact ends this month and the group meets in coming weeks to decide the next move.
US energy companies also cut the number of oil rigs operating for a second week in a row, with production growth expected to slow as crude prices fell to near their lowest levels of the year.