Navigating Gold Trade Transactions: A Step-by-Step Guide for Secure Deals
Example Scenario: Gold Trade Deal Between Dubai and Zurich
Background:
A buyer from Zurich, Switzerland seeks to purchase 500 kg of 99.99% LBMA-certified gold bars from a seller in Dubai, UAE. To secure both parties’ interests and minimize risk, they follow a 10-step transactional process using international trade protocols.
Step 1: Letter of Intent (LOI)
The buyer formally expresses intent to purchase gold by submitting a Letter of Intent (LOI). This document outlines:
Desired quantity: 500 kg
Purity: 99.99% (24K)
Pricing: LBMA Spot Price minus 5% discount
Payment terms: DLC/SBLC MT760
Delivery: CIF Zurich
The seller reviews the LOI before proceeding.
Step 2: Soft Corporate Offer (SCO)
The seller acknowledges the LOI and issues a Soft Corporate Offer (SCO), confirming:
Available quantity
Pricing and discount
Payment method
Required documents (Certificate of Origin, Assay Report, Export License)
Step 3: Irrevocable Corporate Purchase Order (ICPO)
The buyer submits an Irrevocable Corporate Purchase Order (ICPO), confirming:
Their bank details
Readiness to issue financial instruments
Commitment to the agreed price and terms
Step 4: Full Corporate Offer (FCO)
The seller provides a legally binding Full Corporate Offer (FCO), finalizing the trade terms before signing the SPA.
Step 5: Sales & Purchase Agreement (SPA)
Both parties sign the Sales & Purchase Agreement (SPA), detailing:
Quantity, pricing, and Incoterms
Payment method: DLC/SBLC MT760 followed by MT103 wire transfer
Default penalties and dispute resolution terms
Legal enforcement under Dubai International Financial Centre (DIFC) Commercial Law
Step 6: International Master Fee Protection Agreement (IMFPA)
If brokers or intermediaries are involved, all parties sign an IMFPA, ensuring:
Broker commissions are protected
No circumvention occurs
Step 7: Financial Instrument & Payment Guarantee
To secure the deal, the buyer issues a DLC/SBLC MT760 from a top-tier bank. This guarantees seller payment once conditions are met.
Step 8: Inspection & Quality Assurance
The gold bars are inspected by SGS or Bureau Veritas in Dubai before shipment. A final assay report is issued, confirming:
Purity (99.99%)
Weight
Authenticity
Step 9: Shipment & Logistics
The seller ships the gold to Zurich using Brinks or Malca-Amit Secured Transport. The buyer receives:
Bill of Lading (BL)
Export License
Insurance documents
Step 10: Final Payment & Ownership Transfer
Upon SGS verification in Zurich, the buyer releases MT103 payment. The seller transfers official ownership. Disputes, if any, are settled via ICC Arbitration in Paris.
Legal and Financial Risk Mitigation
Seller’s Risks & Penalties
If the seller fails to deliver, they must refund any deposits and pay a 2% penalty of total contract value.
Buyer’s Risks & Penalties
If the buyer fails to issue the SBLC/DLC, they must compensate the seller for losses and pay a 2% penalty.
If the buyer refuses verified delivery, they forfeit deposits and pay 5% of the contract value.
Conclusion: A Secure and Profitable Gold Trade
By following a structured process, buyers and sellers ensure a transparent, legally secure, and mutually beneficial transaction. The use of international trade laws, bank guarantees, and arbitration clauses minimizes risks and maximizes profitability.
Interested in securing a gold trade deal? Ensure your agreements align with Dubai International Financial Centre (DIFC) and ICC standards!