Dubai, already the region's gold trade hub, may see the launch of the Middle East's first gold exchange traded fund (ETF) in 2008, a senior World Gold Council (WGC) official said on Monday.

'Gold trade in Dubai and the region is definitely booming and the market players need an ETF market to manage their risk and catch up with other international markets,' said Moaz Barakat, managing director of the WGC in the Middle East, Turkey and Pakistan.

'There is a great interest for ETFs in the region... We may have a Dubai ETF next year.'  

ETFs offer investors exposure in the underlying commodity without taking physical delivery. Sponsors of gold ETFs buy a matching amount of the commodity from the market to keep in vaults.

'It will be linked to a dollar-based gold price, but it has not been decided yet if it will be listed on the Dubai Gold and Commodities Exchange or the Dubai International Finance Exchange,' he said.

The Dubai ETFs will comply with Islamic law or sharia which bans the charging of interest, equating it with usury, and prohibits investment in businesses that trade in alcohol or gambling, he added.

Dubai is a long-established market for gold bullion and jewellery, wholesale and retail, fuelled by strong demand from the Arab world and India, the world's main gold market.

The Gulf commercial hub launched the region's first gold futures exchange in 2005 as the economies of Gulf Arab nations boomed on a windfall oil income.

US-based StreetTRACKS gold shares is the world's largest gold ETF accounting for more than 80 percent of the metal held by all such funds.

Gold has spurred investors' appetite last year as the precious metal rallied to a 26-year high of $730 per ounce in mid-May.

Total tonnage demand in the United Arab Emirates, a seven-member federation that includes Dubai and Abu Dhabi, rose by almost 24 percent in the first half of the year, while sales value was up by 27 percent during the same period, Barakat said. - Reuters