Commodity investments dubai
Also, inflation — the bane of stocks and bonds that erodes their value — tends to work well with commodities. By definition, inflation drives up prices of commodities. So commodities can play a useful long-term role for private investors as a portfolio diversifier, a means by which to protect from inflation and a means by which to generate wealth from specific industries or regions.
However, it should be noted that while commodities have shown strong performance in periods of high inflation, commodities can be much more volatile than other types of investments. Purchasing physical raw commodities, such as gold, means actually buying and holding the asset.
This comes with the burden of storage. But there are ways of managing this. For example, several bullion firms offer online gold dealing services along with safe storage and insurance solutions. However, secure storage is costly. Investors will also need to ensure they buy the asset at a good price. This can be difficult to achieve, particularly when buying smaller quantities.
Moreover, there are other factors to consider based on the type of commodity such as perish-ability — as is the case with some types of agriculture commodities — and maintenance. Overall, physical commodity investments are best suited for industrious investors. Futures are the most risky and straight forward investment. These are highly volatile and complex investments that are generally recommended for experienced investors only.
On the other hand, equity-based commodity ETFs invest in shares of commodity companies — say Exxon oil and gas — whereas ETCs are instruments that track the price of the commodity, or a basket of commodities. They can either be physically backed by holdings of the commodity itself, or may use swaps with other financial institutions to provide the exposure.
DDE allows manufacturers, traders, and other key entities in the diamond value chain to effectively operate from a transparent, secure and sophisticated platform. During , the volume of diamonds traded reached a record It offers a business centre, temperature controlled storage, blending solutions, packaging, professional advisory and tea tasting services for international tea producers and buyers.
DMCC offers investors sophisticated financial products and has formed various strategic joint ventures to achieve this. Established to develop and seed commodity-linked investment products for distribution in the UAE and other markets. The four strategies are: An electronic system that brings together all parties involved in inventory based financing. Through the platform, owners of goods stored in rated warehouses in the UAE can request warehouse keepers to issue "Tradeflow Warrants" which represent the ownership of their goods.
These warrants can be used by the owners to pledge beneficial ownership or transfer title of the stored goods to financiers as collateral in return for working capital.
This provides investors with secure, low-cost access to owning gold bullion without the additional costs normally associated with insuring, storing and transacting in physical gold. It has adopted the DGR system for effecting the physical settlements of gold and silver against a futures contract position. DMCC has also unveiled its masterplan of the Burj District, which will have a built-up area of over 1 million square metres. These are highly volatile and complex investments that are generally recommended for experienced investors only.
On the other hand, equity-based commodity ETFs invest in shares of commodity companies — say Exxon oil and gas — whereas ETCs are instruments that track the price of the commodity, or a basket of commodities. They can either be physically backed by holdings of the commodity itself, or may use swaps with other financial institutions to provide the exposure. Most ETFs only track an index such as oil futures, so there is little room for manoeuvring.
However, as with futures, investors should be very careful here, as although there are potential gains to be made, there could be huge losses too. Furthermore, there are various levels of tracking errors involved with these securities resulting in the actual return realised by an investor being different than the actual returns of the underlying commodities. A managed investment fund is another way for you to gain exposure to commodities since it invests in commodity-related businesses.
A managed fund also provides a degree of diversification, since it will typically invest directly in a variety of commodities as well as in production companies. For instance, an oil and gas fund would own stocks issued by companies involved in energy exploration, refining, storage and distribution. Another alternative is to directly buy shares of commodity companies.
For example, you could buy shares in companies such as Exxon, BP and Royal Dutch Shell in order to access the natural resources markets.
These can provide a form of leverage on commodity prices. For instance, a mining company involved in gold extraction obtains higher profits as the price of gold rises, since general costs of operations do not necessarily fluctuate proportionately.
Moreover, commodity stocks and commodities do not always deliver the same return. As you can see in the chart below, there are times when one investment outperforms the other.
Commodity investments do offer diversification benefits because their return characteristics are different than those of stocks and bonds. But due to the costs and complexity mentioned above, commodities are an investment area which an investor would be best suited to consider after achieving certain leverage in their portfolio.