Dubai to launch silver ETF

By Melissa Pistilli-Exclusive to Silver Investing News

The Dubai Multi Commodities Center (DMCC) is set to launch an Exchange Traded Fund (ETF) for silver next month, according to financial journalist Peter J. Cooper.  Cooper is a financial journalist out of Dubai Media City and is well-versed in Middle Eastern business and finance. His book Opportunity Dubai was published this month.

Demand for physical silver is high in Dubai according to Cooper, who says local bullion dealers, after exhausting closer sources, are flying silver bars into Dubai from all over the world in order to meet demand.  In the last few years, “the DMCC has successfully established itself as a regional hub for commodities trading . . . and has its own swanky new business park with its gold, silver and diamond towers,” said Cooper.

In January this year, the Noor Islamic Bank based in Dubai announced plans to become the world’s largest Islamic bank within the next five years by spending upwards of $1 billion on acquisitions in Europe, Asia, North Africa, and the Middle East. Currently, Noor is 25 per cent owned by the Dubai government and 25 per cent by the emirate’s ruler Sheikh Mohammed bin Rashid Al Maktoum, who is also the Prime Minister and Vice President of the United Arab Emirates.

Dubai, which interestingly was once the center for gold smuggling to India thirty years ago, is now home to about 20 per cent of the global physical gold trade. The UAE member has long been an established market for gold jewelry and bullion.   A tax free center for commodities traders, the emirate will soon be site of the Middle East’s first gold ETF this fourth quarter.

“Details of the silver ETF are being kept under wraps for the launch but the plans seem at a advanced stage,” said Cooper. The gold and silver ETFs will no doubt have to comply with Sharia law, which prohibits charging interest as it is a form of usury, and bans investments in businesses connected to alcohol or gambling.

The silver ETF price will of course be determined by the spot price for physical silver, which is much lower than the high premiums many are paying for physical silver. The advantage to investors is the ability to get into the silver market at low prices and also the opportunity to “profit from the leverage silver offers to the gold price,” Cooper said.

Cooper has merely hinted at a connection between Dubai’s silver ETF and 1970’s Hunt Brothers. “Will the new Dubai silver ETF have a big enough impact on the tiny global silver market to send prices higher like the Hunt Brothers did in the late 1970s when they cornered the market? Well, nothing succeeds like success and a silver ETF in Dubai looks like the right product in the right place at the right time.”

However, The International Forecaster’s Bob Chapman is more blunt. “The Dubai silver ETF may pick up where the Hunt Brothers left off.” Chapman, who was once owner of one of the largest gold and silver brokerage firms in the 70s and 80s sees Dubai’s silver ETF launch as a calculated move toward cornering the silver market much like the Hunt Brothers did. “The sheikhs may well have decided to go after the silver market.
“What may be happening here is that the OPEC nations, and possibly also Russia, are setting up a counterbalance against the collapse of oil prices,” he said.  Chapman has often railed about sovereign wealth funds in the oil-rich Middle East manipulating precious metals prices up whenever the oil price was hammered by who he calls the “Illuminist manipulators.”  He believes the OPEC nations are once again truing to send the message, “you leave oil alone, or we will send gold and silver to the moon and expose your destruction of the US economy by killing the canaries in the coal mines, thus ringing the gold and silver alarm bells loud and clear.”

Chapman sees the Dubai silver ETF as one way in which the OPEC nations are gearing up to take advantage of what just might be “the greatest opportunity to corner a commodity market in the history of the world.”  Chapman asks his readers to picture what may happen if COMEX gold and silver are “funneled” into Dubai’s new ETFs. He argues that because there is only about one billion ounces of above-ground silver stocks and given that silver is “trading at a ridiculous sub- 10″ it would  be so easy for the “wealthy oil sheikhs and their sovereign wealth funds” to buy up all the above-ground silver.  Chapman believes both oil and silver prices are bound to surge higher. “We should soon see $80 to $100 oil and $15 to $20 silver.”

11/20/2008