DUBAI // Dubai's Gold and Commodities Exchange (DGCX) reported a record number of contracts last month after a 56 per cent increase in volume in the year to date. The region's first derivatives and commodities exchange reported a total volume of more than 186,800 contracts, with an equivalent value of more than US$12 billion (Dh44.04bn). Since January, more than 821,000 contracts were traded for a total value of $43.3bn.
Officials with the DGCX attributed the addition of two new crude oil contracts in May as a major factor for growth. The listings - for Nymex West Texas Intermediate, the benchmark crude for the US, and ICE Brent crude, the standard used in Europe and much of the rest of the world - allow regional funds to invest in oil futures without taking money out of the region. Crude oil represented 22 per cent of the total volume traded last month, yielding more than 41,000 contracts, an increase of 13 per cent from June, the first full month of crude oil trading. Oil prices plummeted to a three-month low of less than $120 a barrel this week, followed by precious metals and grains.
However, Malcolm Morris, the chief executive of the DGCX, said the current price volatility had not reflected negatively on Dubai's contracts trade. "It is important for our exchange to provide a tool where traders can hedge that exposure," Mr Morris said. "If you provide the right products for the right price at the right time by removing all barriers allowing traders access, then even in times of volatility you can see the volumes rise."
Gold volumes also had a strong showing last month, increasing by 167 per cent to more than 109,000 contracts, compared to the same period last year. Gold prices dipped to $894.05 an ounce in Asia yesterday from $896.95 in late New York trade on Monday, after slumping to their lowest level in six weeks. The metal has fallen about 14 per cent since hitting a record high of $1,030.80 on April 18, on higher oil prices.
The massive scale of industrialisation and development in the Middle East and Asia is expected to fuel higher commodities prices as the demand for oil and food continues to grow. Volume has increased consistently in the past four months, due mainly to an increase in crude oil contracts on the DGCX, which effectively hedged risks in a roller-coaster market environment. "DGCX is the only true commodities trade here, and for regional bankers that has an appeal because funds remain here in the UAE," said Mr Morris. "They like that, because you are not incurring the cost and inefficiencies of transferring overseas, plus companies prefer to retain money in their home region."