DGCX introduces new Shari’ah compliant silver spot contract, expected to boost silver demand

With the launch of the contract by Dubai Gold & Commodities Exchange, investors will be able to invest in physical silver through an exchange in the GCC, benefit from a central counterparty clearing house and mitigate credit risk

Dubai: The Dubai Gold & Commodities Exchange (DGCX) has announced the launch of the Gulf Cooperation Council’s (GCC) Shari’ah Compliant Silver Spot Contract (DSSC), aimed at
providing investors with a reliant and transparent platform for trading the white metal. Having received regulatory approval from the UAE Securities and Commodities Authority (SCA), the new contract will be available for trading from October 27, 2023. DGCX will also be waiving its fees for the DSSC until December 31, 2023.

With the launch of DSSC, investors will, for the first time, be able to invest in physical silver through an exchange in the GCC with the benefit of a central counterparty clearing house, mitigating credit risk. By trading through DGCX, investors will also be able to take large positions in silver with no limit restrictions.

Against a backdrop of high inflation, the demand for silver continues to grow. According to The Silver Institute, all major silver demand categories achieved record highs in 2022, with total offtake growing by 18% to 1.242 billion ounces (Boz). Furthermore, S&P Global Ratings expects the global Islamic finance sector to grow by 10% in 2023-2024, which will further support demand for Shari’ah compliant securities such as DSSC.

Ahmed Bin Sulayem, Executive Chairman and Chief Executive Officer, DMCC, said, “The world will see accelerating demand for silver as the precious metal is increasingly used in industries like solar energy and investors maintain their focus on asset diversification. This, combined with the increasing maturity of the global Islamic finance industry, has created the ideal environment for DGCX to launch the region’s first Shari’ah Compliant Silver Spot Contract. Based on our discussions with the market and the success of our Shari’ah Compliant Gold Spot Contract launched in 2018, we expect to see significant interest in DSSC from both traders and investors looking to access silver in a secure and reliable way. We look forward to working closely with our members to continue bringing innovative contracts to the market in the months and years ahead.”

The underlying asset of each DSSC contract, which has been certified by prominent Shari’ah scholars, is a 999.9 purity 900-ounce silver bar of “UAE Good Delivery” specification. Delivery of the contract is made seamlessly through DMCC Tradeflow, a flexible and customised online platform to register possession and ownership of commodities stored in UAE-based facilities, ensuring a seamless end-to-end process.

DGCX expects there to be significant interest in its Shari’ah Compliant Silver Spot Contract from a range of market participants, including managers of exchange traded funds (ETFs), banks and non-banking financial institutions, as well as commodities traders. DSSC adds to DGCX’s existing portfolio of precious metals contracts, which includes Shari’ah compliant gold spot as well as silver and gold futures.

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