The Middle East’s largest derivatives bourse, the Dubai Gold & Commodities Exchange (DGCX) has seen a huge influx of investments, as investors are increasingly turning to safe-haven assets amid the coronavirus outbreak.

The trading of gold futures contracts on the bourse registered a huge spike in January and February, with the year-to-date volume growth estimated to be at 773.6 percent compared to the same period last year.

“The spike in trading is a response to a global backdrop of economic uncertainty, with investors increasingly looking towards safe-haven assets,” the DGCX said.

The precious metal increased its lustre in recent weeks amid concerns that the outbreak of the coronavirus could slow down the global economy.  On February 20, the price of the bullion climbed to its highest level in seven years, as the number of infected individuals rose and the virus spread outside China.

Karim Merchant of Dubai-based Pure Gold Jewellers said investors have the tendency to reposition and move their money to safe havens every time there is uncertainty in the markets. “[The] price of gold always rises during times of panic and uncertainty,” Merchant told Zawya.

And it’s not just jewellery, bars and coins that are increasingly becoming popular during uncertainty. “All the [gold-related products] ETFs (exchange-traded funds) are in demand. Everybody is buying gold because people think it is a safe haven,” Chandu Siroya, vice chairman of the Dubai Gold and Jewellery Group (DGJG) said.

February trading volumes

On the DGCX, total volumes of gold futures trading hit 1.49 million contracts in February. Trading across the bourse’s G6 currency pairs was also strong last month, with the asset class recording overall volume growth of 18.1 percent in February.

“Unforeseen event during the first two months of this year have sent shockwaves across global markets. Investors are bearish on the global economy and increasingly turning to products that can help them manage their risk, Les Male, CEO of DGCX, said.

Male said the spike in trading also indicates that several investors are recognising the value that DGCX products offer for hedging purposes. “The rest of the year promises to be particularly busy for us, as we prepare to launch new locally relevant products,” he added.

Established in 2005, DGCX has offers futures and options contracts covering the precious metals, energy, equities and currency sectors.

(Reporting by Cleofe Maceda; editing by Seban Scaria)

Cleofe.Maceda@refinitiv.com

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