Japan is ready to introduce the first true gold-backed ETF (exchange traded fund) according to State Street Global Advisors (Japan) Co, who are aiming to offer a gold EFT on the Tokyo exchange early in the new year.
David Collins, vice president in charge of marketing with State Street Global Advisors (Japan), stated that recent revisions to Japans Trust Business Law and Financial Instruments and Exchange Law have opened the door and loosened some of the restrictions on the listing of types of investment trusts that incorporate physical commodities.
Previously the Osaka Securities Exchange's version of a gold ETF had to be backed by bonds linked to the gold price and were not able to be exchanged for physical gold. As such, many investors stayed away considering this as not being a "true" gold ETF.
Collins stated that these regulatory changes in Japan have opened the door for the listing of new ETF products here.
"That's the plan. We are looking at maybe the first quarter of next year, and it will be a dual-listing very similar to what we did in Singapore," he went on, "Demand should be great. There is a very strong desire to diversify right now, and so there should be a great tailwind,"
Gold ETFs allow investors to participate in the gold market without actually having to own and store physical gold. The gold is stored in bank vaults and certificates of ownership are issued which can be traded rather like shares.
The Fortis Bank and Virtual Metals Research & Consulting, in their "Yellow Book" gold market report released earlier this week indicated that ETFs will continue to play a key role in supporting gold demand.
The biannual report stated ETF demand has been above 200 tons for the past three years and forecasts the total amount of gold held by various ETFs around the world will be well over 1,000 tons in the coming year.
"This estimate could be too low if new products are launched in the Middle East and Asia," the report said.
The "Yellow Book" estimates that in 2007, ETFs will have bought 241 tons of gold, which would mean that this relatively new investment tool will account for 6.3% of the total demand forecast for the year of 3,798 tons.
Japan Gold ETF Could indeed Support Global Demand in the coming year.