Dubai Gold and Commodities Exchange to list Shanghai gold futures

Chinese gold and coffee will play a larger role for Dubai’s commodities market after several deals were signed in Shanghai last week as the emirate seeks to boost ties with its No 1 trade partner.

The Dubai Gold and Commodities Exchange (DGCX) said on Saturday it will list Shanghai gold futures, marking the first time that a foreign exchange will use the yuan-based gold product.

The futures will be traded according to the Shanghai gold benchmark price, established two years ago to open China’s financial market to global economic integration.

To help facilitate the trades, the Agricultural Bank of China (ABC) will be the first market maker for the product, DGCX said in a statement.

The bank’s DIFC branch will bid and offer prices with a minimum spread and maximum size, maintaining margins and collaterals. Gaurang Desai, the chief executive of DGCX, said that this will help to bring more liquidity to the market.

“This will ensure that we have a strong start to trading,” he said, adding that there was already a strong appetite from investors. “[The Shanghai Gold Futures] to be traded and cleared outside of China allows us to further strengthen our offering, deepening our commitment to the gold market.”

Gold trading volumes for the Shanghai Gold Exchange were up nearly 22 per cent in September compared to the previous year.

China has been Dubai’s biggest trading partner since 2014 and it has been the second-largest trading partner of the UAE as a whole since 2011. China’s investment in the UAE is close to US$2.33 billion, according to Dubai Chamber of Commerce and Industry

In addition Dubai is looking to become a global coffee distributor with the help of beans from Yunnan State Farms. Dubai Multi Commodities Centre (DMCC) signed a deal with Hong Kong-based holding firm Mega Capital Halal that will involve up to 140,000 tonnes of Chinese Arabica beans making their way to Dubai for redistribution to other markets, DMCC said in a statement.

The DMCC will offer storage and warehousing facilities and office space within a 4,500 square metres temperature-controlled facility. DMCC wants to boost the commodities trade along the West -East corridor, according to Gautam Sashittal, the chief executive of DMCC.

Saxo Bank said last month that Arabica coffee was beginning to show signs of life once again after having an 18-month downward trend. Arabica coffee prices rose 5 per cent last month, according to the International Coffee Organisation.

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