Published on: November 26, 2023
Author: Derar Hasn
|Table of Content
|Is buying gold in Dubai a good investment?
|Which gold is best for investment?
Gold has a long and rich history, dating back to ancient civilizations where it was used for currency and jewelry. It has also played a significant role in world economics, especially since the so-called gold standard, where the currency’s value was pegged to the amount of gold it represented, which was still wildly used until the 1970s.
If you want to find out how to invest in gold in Dubai, this in-depth guide is for you. We’ll discuss a few ways to do so. Please remember that trading and investing involve risk. Conduct thorough research and both fundamental and technical analysis on the asset type you want to invest in or trade.
Today, gold remains one of the most popular assets among traders and investors worldwide. In fact, it’s the most traded asset on the amana app, a Dubai-based leading MENA neo-broker.
People invest in gold for many reasons, including hedging against inflation and economic uncertainty. Historically, during whirlwinds of financial or political drama, gold has been the steadying force. Investors flock to it because they often feel gold offers a safer harbor during the storm.
Gold as a risk hedge
Gold is also a limited resource, and its supply is constrained, which can contribute to its value. It’s widely recognized and accepted around the world, making it a liquid and useful asset for diversifying investment portfolios and reducing risk. The yellow metal also has various industrial uses, such as in electronics and jewelry, which can drive demand and increase its value.
What can impact gold prices?
So, are you wondering what to watch out for when investing in or trading gold in Dubai?
Gold, like any investment asset, is sensitive to many factors that can impact its value. Here’s a brief list of what these could be:
Interest rates: Changes in interest rates can impact the demand for gold. As interest rates increase, the price of gold generally declines as investors prefer to invest in stocks and fixed-income assets that can generate profits. On the other hand, when interest rates decrease, the value of gold tends to rise as investors seek the safety of gold as a refuge during times of economic uncertainty, with the aim of safeguarding their wealth.
Demand: Since the 1970s, the demand for gold has been consistently increasing, leading to a substantial rise in its price. Gold is widely used worldwide for various purposes, including jewelry and technology, and as a valuable asset for central banks and investors.
The US dollar: Gold and the US dollar have a complex, typically inverse, relation. When the dollar's value decreases, investors often seek other ways of preserving their wealth. It leads to an influx of buyers in the gold market, causing its price to rise. Moreover, a weakening dollar usually strengthens other currencies, enabling increased purchasing power and driving up the demand for gold that was previously beyond reach.
Inflation: Gold is often seen as a hedge against inflation, and higher inflation expectations can increase demand for the precious metal.
Monetary policy: Monetary policy decisions, such as changes in the money supply or the use of unconventional monetary policy tools, can impact the value of gold.
Global economic growth: The global economic growth outlook can impact the demand for gold, as a robust global economy can increase the demand for riskier assets and decrease the demand for safe-haven assets like gold.
Geopolitical tensions: Geopolitical tensions, such as military conflicts, political instability, and international trade disputes, can increase demand for the metal. For example, in August 2020, gold hit an all-time high. This move was mainly driven by fears of the economic impact of the coronavirus pandemic and lockdowns.
Natural disasters: Natural disasters, such as hurricanes, earthquakes, and wildfires, can disrupt supply chains and impact the production and availability of gold.
It’s a very good question. And there’s no single answer. Everything depends on your strategy and circumstances. You can either do gold trading or investing. These are two completely different ways to take part in the gold rush.
Investing in gold involves purchasing the asset outright and earning profits if its price increases. On the other hand, trading gold is about speculating on the price movement without actually owning the physical asset.
There are various types of gold assets that you can choose to trade or invest in, depending on your preference. These options include:
It occurs in the form of coins and bars. Gold bullion is often used as a reliable store of value by individual investors and banks. However, high safekeeping costs and insurance obligations can discourage more active investors from directly buying the metal.
The spot price of gold refers to the immediate cost of purchasing gold, usually for one troy ounce. Trading spot gold is a common way for investors to gain exposure to gold bullion without the need to physically own the precious metal.
Futures contracts allow you to exchange gold at a predetermined price on a specific date. By entering into a futures contract, you commit to fulfilling your part of the agreement, whether that means making a physical delivery of gold or settling in cash. These contracts have standardized terms for quantity and quality, with their price determined by market forces.
Options contracts are similar to futures contracts but with no requirement to execute the trade upon purchase. These contracts grant you the right to exchange physical gold or gold futures at a fixed price on a specific date. Call options give the holder the right to buy the precious metal, while put options grant the holder the right to sell it.
Exchange-traded funds (ETFs) follow the performance of a basket of shares from publicly traded companies involved in gold mining, refining, and production. If you decide to engage in trading or investing activities with an ETF, it gives you a broader exposure compared to individual positions, making them an attractive option for portfolio diversification. ETFs are considered passive investments as they aim to replicate market returns rather than actively pursue superior performance.
If you’re looking for indirect exposure to the safe-haven asset, gold stocks might be for you. Through stocks, you can gain exposure to various elements of the gold industry, including mining, production, funding, and sales. However, it’s key to recognize the movement of gold stocks may not always be associated with the actual bullion, as share prices are influenced by numerous additional factors.
Tips to invest in gold in Dubai
Once you decide what type of gold assets you want to tap into, you need to decide what’s the best way for you to do so.
Online brokerages like amana allow for gold trading and investing in Dubai. The amana app, engineered by a broker with 10+ years of experience, empowers you to take a position on the gold market in several ways:
Trade gold - XAU/USD:
Dive into the action with direct gold trading, where you can capitalize on price movements in real time with leverage.
Explore gold ETFs:
Take a diversified approach by investing in gold exchange-traded funds (ETFs) like Goldman Sachs Physical Gold ETF (AAAU) and VanEck Merk Gold Trust ETF (OUNZ).
Invest in gold mining companies:
Shine bright by investing in top gold mining companies such as Barrick Gold (GOLD), Agnico Eagle Mines (AEM), and Wheaton Precious Metals (WPM).
No matter if you’re in the mall, car, metro, or bus in Dubai, you can trade and invest in gold on the go on the amana app.
Can you make money buying gold in Dubai?
Yes, it’s possible. But it’s also possible for you to lose your money because every type of investment involves risk. So, it’s crucial to equip yourself with knowledge. Observing the gold market and staying on top of the news on the metal is also vital to increasing your chances of being profitable.
Investing in gold in Dubai can provide traders and investors with a valuable opportunity. With its historical significance and role as a safe haven asset, gold tends to offer stability and potential for profit.
By considering various factors influencing gold prices and exploring different investment options, you can make informed decisions and take advantage of moves in the gold market. Trading apps like amana offer convenient platforms for trading and investing in gold, providing accessibility and flexibility. While there are risks involved, staying informed and conducting thorough research can bring you closer to a successful investment and trading journey in the world of gold in Dubai.