Gold-secured financing on the rise

A growing number of traders, gold bullion banks and vault operators are making use of the Dubai Gold Receipt system to obtain credit secured on gold inventories.

According to the Dubai Multi Commodities Centre (DMCC), more than $100 million worth of financing has been secured in this way in the last eight months - which may be further indication of the increased confidence being placed in the yellow metal.

With investors already flocking to gold investments for security in the face of a weak dollar and economic uncertainty, the DMCC's announcement could be another indicator of the current strength of gold.

"Given the current volatility in global gold markets and the ensuing Basel II regime, banks are on the lookout for secured lending options that enable them to mitigate risk better," commented Ahmed bin Sulayem, executive chairman of the DMCC.

Dan Looney of Towry Law recently told the Guardian that commodities such as gold can hold much lure for investors in a climate of inflation.

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