Gold trading and gold investment: How to trade gold in the UAE

Chaos reigns in global financial markets as the trade tarifftiff between the United States and China continues to escalate and a similar conflict remains unresolved between the United States and its North American neighbours. There’s also geopolitical tension in various global hotspots.

Predictably, gold trading activity and gold investment in the UAE have increased amidst the turmoil caused by political and economic uncertainty. Investors are scrambling to convert some or a good portion of their holdings into gold because it is a known safe-haven asset and an excellent store of value during troubled times.

If you wish to do the same, how do you go about it? How do you trade or invest in gold?

Gold trading vs gold investing

Before jumping into the mechanics of gold trading and investing, first, learn to distinguish these two related but distinct activities.

Investing is buying gold or taking ownership of gold or other assets linked to gold, such as gold futures, options, contracts for differences (CFDs) and exchange-traded funds (ETFs). However, it’s not the asset class but the buying pattern or behaviour that differentiates gold investing from gold trading. Gold investors buy and hold.

To invest in gold in the UAE, you buy and then hold the gold or gold-linked assets for a long period. You wait for their value to rise and then earn money from capital gains when you sell them at a higher price. Some assets may generate income through dividends.

Trading is speculating on price fluctuations and opening a position aligned with the expected price movement. Is it going up or down, by how much, and how fast is it moving? When you trade gold, you profit when the price moves in the direction, velocity and degree you anticipated.

Traders can buy and sell the same instruments (physical gold and gold-linked assets) investors do, but they primarily buy and sell CFDs, futures and options. Gold investing always means taking a long position. Meanwhile, gold trading means going long when expecting a price hike and going short when expecting prices to decline.

How to invest in gold in the UAE

Check out five ways you can trade and invest in gold below:

1- Buying and selling physical gold

How to buy gold in Dubai? Open a gold investment account in the UAE. Equiti Gold, an entity regulated by the Dubai Multi Commodities Centre (DMCC), has a secure mobile gold trading app you can use to buy bullion.

Opening an account is free. Fill out the required registration information, including your contact details. Next, verify your identity with your passport or resident ID and link your online gold trading account with your bank account.

Once your gold account in the UAE is active, you can buy investment-grade gold bars with 999.9 purity stamped by refineries certified by UAE Good Delivery (UAEGD). Choose your denomination: grams, ounces, troy ounces, and kilograms.

There’s no limit to how much gold you can buy, but there are minimum thresholds you must meet. Gold bullion 50 grams or below is physical gold you can store with Equiti. If you buy more than 50 g, you can have gold delivered to your home or sent to someone else as a gift.

2- Buying and selling shares in gold supply chain companies

You can gain exposure to gold price movements by investing in upstream, midstream and downstream gold companies.

• Upstream: gold exploration and mining entities
• Midstream: gold smelting, refining, purifying, and processing companies
• Downstream: jewellery brands, distributors

3- Buying and selling gold ETF shares

Exchange-traded funds are funds that track the market price movements of particular assets, such as particular commodities, an index like the S&P 500, or a mix of assets. A gold ETF may own physical gold, shares in gold mining companies, gold futures, gold options, and gold contracts for difference.

When you invest in or trade gold ETFs, you obtain shares (i.e., an ownership stake) in the fund but don’t gain ownership of the fund’s gold and gold-linked assets.

4- Buying and selling gold CFDs

Buying and selling gold CFDs is a gold trading rather than a gold investment strategy. It’s purely speculative.

You open a gold CFD trade based on your predicted price movements. Buy CFDs or go long if you think the price of gold will increase. Sell CFDs or go short if you believe the price of gold will decrease.

For example, if you believe the price of gold will rise by AED 400 in 15 days, open a long position on gold CFDs with a broker and hold your position for those 15 days. If your prediction comes true and the price does increase, you can close your position, and your CFD broker will pay you the difference between the contract’s entry and exit prices. However, if your prediction does not come true, you’ll pay the broker the difference in these opening and closing prices.

Gold CFDs carry great profit potential since you can use a small deposit to open a much bigger trade. At a leverage of 1:10, for example, AED 1,000 lets you control an AED 10,000 position.

Leverage is a double-edged sword, however. Just as it lets you amplify gains, it can also magnify losses.

5- Buying and selling gold futures and options

Futures and options are instruments traded on commodities exchanges. Like CFDs, they may be leveraged.

Gold futures are contracts that specify the exchange of a specific quantity of a particular quality of gold between the buyer and the seller. It designates an expiry date (positions will close at this date) and a settlement price.

Futures bind the parties to the agreement. They settle in the buyer’s or seller’s favour, depending on price movements, although you are permitted to close your position before expiry.

Gold options are contracts, too, but they just provide the buyer the option to buy gold (call option) or the seller the option to sell (put option) at the settlement price on or before the expiry date. They do not obligate the buyer or the seller to follow through.

Those who need physical gold can use gold futures and options as a safeguard against price fluctuations. Traders, however, rarely take ownership of gold, profiting mainly from the financial settlements arising from correct price predictions.

Trade and invest in gold in the UAE

Gold is an excellent store of value. It can diversify your portfolio and help you hedge against inflation. You can also trade gold, going long or short to realise gains from price fluctuations.

Equiti is a trusted UAE broker. We offer trading platforms for various products, including gold and provide online trading tools to help you make the best trades. Visit the gold trading app on Equiti Gold to buy gold or the Equiti trading app to trade gold-linked CFDs.