Gold ETFs in UAE

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UAE’s love and fascination for gold are well known globally. Apart from being a pioneer in the gold market all across the globe, it is a leading consumer of gold as well. With changing investing in gold has gone beyond owning physical gold. A lot of people prefer investing their earnings in paper form of gold like ETFs, gold bonds, gold stocks, etc.

An ETF or exchange-traded fund is traded on an exchange similar to stocks. It is a type of security that involves a collection of several securities such as stocks. ETFs are quite similar to mutual funds; the major difference being that ETFs share trades like ordinary stocks. In the case of Exchange-traded funds, the price of shares keeps on changing throughout the entire trading day, unlike mutual funds which are not traded on an exchange.

Gold Exchange-traded funds work by combining different features of the stock exchange and gold investment. Gold ETFs are based on the current gold rate in UAE and the investment is usually made in the form of bullions. The transactions are carried out by stockbrokers who use your money to buy gold at the current gold rate in UAE. One unit of Gold ETF is equivalent to one gram of gold at the same price you purchased it on. These gold ETF units are sold on the stock exchange cash market the same as a company’s stock.

What is Gold ETF?

The gold ETFs are exchange-traded funds that can be initially purchased and later sold on the stock exchange with the motive of yielding some profit. The best part about investing in gold ETFs is that one does has to worry about the troubles of keeping gold in its physical form. Purchasing gold in its physical form like bars, coins, chains, etc. is more expensive when compared to exchange-traded funds. The price at which gold ETFs are purchased is close to the current gold rate in Dubai.

Gold Exchange-traded funds are often considered as defensive investment options as multiple investors choose ETFs as a hedge against inflation, political instability or weakening value of domestic/international currencies.

It has been observed that people start stocking gold when there is a drop in the value of international currencies like USD. If your financial portfolio holds assets that have risks which might arise with the weakening value of dollars investing in gold ETFs mitigates the risk and hedges that exposure.

Features of Gold ETFs in UAE

Gold ETFs are transparent and similar to the stock exchange and share market the prices are visible publicly. Investors can keep track of their financial portfolio by cross-checking the gold rate in UAE for that hour or day. There is no such limitation on the quantity of purchase of gold ETFs, an individual can start trading with one single unit of ETF. You can choose to buy or sell these stocks via a stockbroker on a daily or hourly basis. The brokerage charges involved with ETFs are considerably low when compared to the stock exchange or share market. The fluctuations in the gold rate in UAE are less than the equities which reduce the risk of financial loss.

Wrapping it up

Gold ETFs increase the overall utility of gold as an investment option. Gold is a hedge against inflation, market instability and is considered as a safe investment option. Moreover, investing in gold ETFs acts as collateral while applying for loans. Gold ETFs strengthen and diversify your financial portfolio. During volatile market conditions, a diversified investment portfolio helps to withstand phases of instability and mitigates the risks of possible financial losses.

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