Friday, July 25, 2008

Hong Kong Gold ETF

Hong Kong will launch its first gold exchange traded fund ( Gold ETF) in a few days attracting Hong Kong investors keen to cash in on gold to preserve their wealth and hedge against rising prices.

The Hong Kong's market regulator, the Securities and Futures Commission, has given the green light for the launch of the SPDR Gold Trust by the World Gold Council and investment firm, State Street Global Advisors.

SPDR Gold Shares is an ETF that will hold allocated pooled gold, stored in a vault in London, as its asset. Each share will represent one-tenth of an ounce of gold. A minimum order of 10 shares, or one ounce of gold will be required to start off an account.

SPDR Gold Shares already trade in New York, Japan and the Hong Kong market is seen as a new and potentially wealthy market to capitalize on.

The exchange-traded fund will be listed on the Hong Kong Stock Exchange. It will track the price of gold which it keeps in a HSBC vault in London.

Sammy Yip, Head of Exchange-Traded Funds (Asia Pacific), State Street Global Advisors, stated, "You may trade these gold shares in exactly the same way you trade any stock."

Hong Kong's listing follows a very similar fund launched in Singapore and Tokyo, but the fund's manager was quick to state there will be no rivalry between the three markets.

"We are talking about three different markets and the underlying investors' characteristics are also different. So I believe the listings basically will be able to offer more to investors to participate in this product," said Yip.

However this ETF will suffer the same disadvantages as other ETFs traditionally have, including the fact that investors will not be able to redeem any gold of course as they will not actually own any gold. This is simply an investment in the value of the unspecified quantity of gold held by SPDR and is subject to the variations that beset any investment vehicle.

James Turk, the noted gold authority, stated recently, "Gold is we all know as an inflation hedge, but not everyone understands that it is also a catastrophe hedge. Gold is both a tangible asset and money. Consequently, gold is the only money that is not someone's liability. In other words owning physical gold does not have counterparty risk, which is an attribute that is becoming increasingly important given the fragility of the banking system."

So, in this case, a more secure gold investment would be to buy gold coins or gold bars that you own 100% and store them securely.

In that situation gold and silver is truly owned directly by you with no counterparty risk.  When it comes to your gold and silver bullion, no risk is what it is all about when it comes to your assets!

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