Gold-backed securities lower the cost and hassle of owning bullion
Friday, March 28, 2003
markets.scmp.com
BLOOMBERG in Sydney
Gold Bullion, backed by the World Gold Council, will start trading bullion-backed shares today on the Australian Stock Exchange, giving investors direct ownership in bars held in London vaults by HSBC Bank USA.
The value of the shares traded may exceed A$1 billion (about HK$4.66 billion) within a year, said Graham Tuckwell, executive chairman of Gold Bullion. Each share represented one-tenth the value of an ounce of gold and with the price of gold at about A$550, they should start trading at about A$55 each, he said.
Gold has lost about two-thirds of its value since peaking at US$850 an ounce in January 1980 because investors turned to assets offering higher returns as inflation fell. Gold Bullion said the shares would make it cheaper and less cumbersome for investors to own bullion.
"There is a compelling case for having gold bullion in an investment portfolio," Mr Tuckwell said. "We are arguing an asset allocation of some 3 to 7 per cent in gold and if you spread that across all portfolios in Australia we are talking a great deal of money."
The price of the securities should closely track the price of spot gold and trading should be "highly liquid", Mr Tuckwell said.
There was no minimum trading amount and a management fee of 0.02 per cent a month covered all corporate, storage and insurance charges, representing between 10 and 20 per cent of the cost of trading gold on other markets, he said. The physical gold will be insured and held in London vaults by HSBC Bank USA, a unit of HSBC Holdings.
The company expects demand for the securities from investors in Australia, where mergers among gold companies have reduced investment opportunities in gold equities. |
