The World Gold Council has forged a partnership with the Dubai Multi Commodities Center (DMCC) to launch a exchange-traded gold security which will comply with Sharia law.
Dubbed "Dubai Gold Shares," the DMCC and World Gold Council are awaiting approval from the Dubai Financial Services Authority. Assuming they get it, Dubai Gold Shares will be traded on the Dubai International Financial Exchange (DIFX), and will denominated in U.S. dollars.
An interesting aspect of the fund, and what evidently makes it compliant with Sharia law, is the shares in Dubai Gold will be backed up by physical gold. The actual physical bars will be stored in vaults the DMCC and another sub-custodian, HSBC.
The physical gold bars are Dubai and London Good Delivery Standard.
The World Gold Council is a group that represents the largest gold mining companies in the world.
This seems to be a way for the mining companies to enlarge and extend demand, as gold stretches the limits of its increase in price.
Sharia compliance should generate a long-term demand for gold based on investing for reasons more than profits alone.
As far as the World Gold Council goes, it is a risky move to align itself with law considered by many to be repressive and brutal. It could cause them a lot of backlash.
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