Gold Index in the Saudi Financial Market: A Comprehensive Guide for Investors

The gold index, in its global context, is a measure that reflects the movement of gold prices either in US dollars or local currencies. It is often used to refer to the spot price of gold in global markets or the performance of investment funds tracking gold prices. In the Saudi financial market, there is no official index named "Gold Index" among trading indices, but the term is used as a reference index to monitor local and global gold prices and the performance of investment funds linked to it, such as the Al-Bilad Gold ETF. The local gold price is calculated by multiplying the global spot price by the exchange rate of the Riyal against the Dollar (approximately fixed at 3.75), taking into account manufacturing fees and local demand. Global prices are based on reports from the London Bullion Market Association (LBMA) and the US COMEX exchange. Gold is a fundamental hedging tool in investment portfolios, especially during periods of economic instability, where it is viewed as a store of value and a safe haven away from stock and currency fluctuations.

The gold index in the Saudi market is measured indirectly based on several sources: 1) Global gold prices in US dollars (spot price), 2) The price of gold in Saudi Riyals after conversion, and 3) The performance of listed investment instruments such as the Al-Bilad Gold ETF. Prices are updated daily based on global market movements, with a settlement price issued twice daily on the London exchange. The Al-Bilad Gold ETF follows the spot price movement of gold, where its units reflect the value of the gold actually owned by the fund, according to asset management reports from Al-Bilad Financial. Investors can track prices through the Saudi Tadawul market platforms and local bank applications, as well as through global financial news sites like Reuters. Additionally, gold performance is analyzed through reports from the Saudi Capital Market Authority, especially when studying its impact on local inflation and portfolio diversification.

The Al-Bilad Gold ETF (symbol 1111) is considered the only official investment tool specialized in gold in the Saudi Tadawul market until mid-2025. The fund allows investors to purchase units representing a share in an actual gold reserve, managed by Al-Bilad Financial. The unit price is determined based on the global price of gold per ounce and the fund's gold inventory. The fund does not provide periodic cash distributions; its returns depend on changes in gold prices in the markets. The fund is characterized by ease of trading and purchasing through any licensed financial broker in the Kingdom, with unit values updated daily according to the global gold price. Recent data shows that the unit price ranged between 20 and 21.5 Saudi Riyals by the end of the first quarter of 2025, influenced by rising global gold prices. The fund is a suitable option for those seeking direct exposure to gold prices without the need to purchase and store physical gold.

Global gold prices experienced notable fluctuations during 2024 and 2025. By the end of December 2024, the ounce recorded a price of approximately $2596.89, later rising to $3153.09 in May 2025, achieving a rise of over 40% since the beginning of the year. This movement directly affected the Saudi market, where the price of 24-carat gold per gram rose to 330 Riyals in early 2025, reaching some points up to 380 Riyals per gram based on conversion from global prices. This increase is attributed to several factors: escalating geopolitical tensions, rising inflation expectations, and declining real bond yields. This led to increased trading volumes of gold funds such as the Al-Bilad fund, with growing interest from Saudi investors in diversifying their portfolios away from traditional assets like stocks and real estate.

Gold prices are influenced by a series of economic and political factors. The most important include: 1) Global inflation: Rising inflation rates drive investors towards gold as a means of hedging against loss of purchasing power. 2) Interest rates: There is an inverse relationship between gold prices and US interest rates, where rising interest rates decrease gold's attractiveness. 3) Strength of the US dollar: When the dollar weakens, gold prices typically rise in other currencies. 4) Geopolitical crises: Wars or economic crises increase demand for gold as a safe haven. 5) Central bank policies: Central banks' purchases of gold affect global demand. 6) Supply and production: Increases or decreases in global production change market balance. In Saudi Arabia, local gold prices remain tied to global prices with limited influence from local factors such as seasonal demand or manufacturing fees.

The mining sector, particularly gold, plays an increasingly important role in Saudi Vision 2030 to diversify the national economy and reduce dependence on oil. The Kingdom has significant gold reserves, and companies like Ma'aden (Saudi Arabian Mining Company) are working to develop gold mines and increase local production. The sector includes gold extraction, refining, and selling locally and globally, and these operations are supervised and regulated by official bodies such as the Ministry of Industry and Mineral Resources and the Capital Market Authority. The state encourages investments in mining through incentives and legal facilitation, reflecting on the sector's growth and enhancing gold's position as a strategic resource and driver of local economic growth. Mining projects also contribute to job creation and the development of new areas within the Kingdom.

There is a fundamental difference between investing in physical gold (bullion, coins, jewelry) and investing through gold exchange-traded funds (ETFs). Physical gold requires purchasing from jewelers or banks, and the investor bears additional costs such as manufacturing, storage, and insurance fees, with risks related to theft or damage. On the other hand, gold ETFs, such as the Al-Bilad fund, provide the opportunity to invest in gold through the financial market without the need to physically own the metal, reducing costs and logistical risks. Funds also offer greater flexibility in buying and selling, and are subject to regulatory oversight, enhancing transparency and reliability. However, the performance of the funds is directly linked to global gold price movements.

The Al-Bilad Gold ETF is the only official competitor in the Saudi Tadawul market for gold investment products until mid-2025. In contrast, gold faces competition from other investment alternatives such as stocks (especially mining companies like Ma'aden), real estate, bonds, and real estate investment trusts. Physical gold remains a strong competitor due to the culture of purchasing bullion and jewelry in Saudi society. Globally, gold index funds such as SPDR Gold Trust (GLD) are available, but have not been officially listed on the Saudi Tadawul yet. Global markets and forex markets remain options for investors looking to diversify their investment tools, considering the regulatory and operational risks associated with trading outside the Kingdom.

Due to the nature of the Al-Bilad Gold ETF as an exchange-traded fund (ETF) rather than a profit-making company, traditional financial indicators differ from those of companies. The unit price ranged between 20 and 21.5 Riyals in the first quarter of 2025. The market value of the fund changes based on the number of units issued and the unit price, estimated at several hundred million Riyals. The fund does not generate operational profits or cash distributions; rather, investor returns depend on changes in asset value (gold price). The fund witnessed a net asset value increase of 20–30% by the end of the first quarter of 2025 compared to the end of 2024, influenced by rising global gold prices. There are no indicators such as price-to-earnings (P/E) or dividend yield for the fund, and financial performance is limited to the revaluation of the gold reserve at each financial period.

The Saudi Capital Market Authority (CMA) is responsible for regulating and supervising all listed investment instruments, including gold exchange-traded funds. The authority sets disclosure and transparency standards for investment funds, requiring companies and funds to issue periodic reports on asset performance and fund value. The authority also monitors the impact of gold prices on the local market and works to protect investors from unjustified risks through clear guidelines regarding the nature of investment instruments. The authority does not provide any direct investment recommendations or advice, and always urges investors to consult a licensed financial advisor before making any decisions regarding the purchase or sale of gold trading instruments.

During 2024 and 2025, gold news dominated the economic scene due to fluctuations in global prices. Among the key developments: Reuters reports indicated price volatility around $2596.89 per ounce in December 2024, with weekly losses due to expectations of US interest rate hikes. Conversely, mid-2025 witnessed a historic price surge with the ounce reaching $3153.09, supported by declining bond yields and rising inflation fears. Locally, trading volumes of the Al-Bilad Gold ETF increased, with a growing trend towards gold as a safe haven. No significant regulatory changes have been recorded regarding gold trading in the Kingdom, but there are indications that some banks intend to launch new gold trading products in the future. Ma'aden continues to expand its activities in exploring and developing gold mines in collaboration with global partners.

Despite gold's appeal as a safe haven, investing in it involves a range of risks and costs. For physical gold, risks include price fluctuations, purchase, storage, and insurance costs, and risks of theft or damage. In contrast, gold ETFs focus costs on management fees and commissions when buying and selling, along with annual fund fees. In terms of risks, investors are exposed to fluctuations in global gold prices, liquidity risks (especially in unstable times), and risks from sudden regulatory or economic changes. It is always advisable to diversify investments and not rely solely on gold to achieve financial goals.

Gold is considered an important tool for diversifying an investment portfolio, as it often moves in the opposite direction to stocks and bonds during crises. Investors rely on gold to hedge against inflation and the loss of purchasing power of local currencies. Gold also helps reduce overall portfolio risks, especially during periods of economic or geopolitical uncertainty. In the Saudi market, many investors turn to adding gold, either directly through ETFs or by purchasing physical gold, as part of a diversification strategy to improve the risk-return balance.

Analyses indicate that gold will maintain its appeal as a safe haven amid expectations of continued global inflation and financial market volatility in 2025. Saudi investors' interest in gold is likely to persist, whether through ETFs or physical gold. In the long term, the development of the local mining sector may enhance gold's role in the Saudi economy, especially with the state's direction to increase the exploitation of mineral reserves. New investment products in the Saudi market, such as futures contracts or gold certificates, are also expected to be launched, providing more options for local investors. It remains important for investors to monitor global regulatory and economic developments and to consult a financial specialist before making any investment decisions.