Update on the new NYSE-listed gold fund:
Gold fund on track, new filing shows...
security seen hitting NYSE within months
SAN FRANCISCO (CBS.MW) - A controversial proposal for an exchange-traded gold fund is back on track, according to a fresh filing with the U.S. Securities & Exchange Commission.
Equity Gold Trust hopes to list on the New York Stock Exchange before year's end, and around the same time or shortly thereafter on the London Stock Exchange. As reported here earlier this year, the new trustee for the exchange-traded fund, which would represent actual bullion in a vault and trade real-time, will be Bank of New York.
The exchange-traded fund's backers, the World Gold Council, along with designated manager World Gold Trust Services LLC of New York, just filed the new S-1, and this CBS MarketWatch report is the first to point to the document. The new fund, long the subject of controversy over its choice of trustee and its tax status, appears to have answered no fewer than 55 questions from SEC regulators who combed through its first filing.
HSBC is the custodian of the proposed trust, which will change hands according to the value of one-tenth of an ounce of gold (38099902: news, chart, profile).
"We think we can get this out by the end of the year," one of the fund's sponsors told me Monday morning.
The fund - and similar ones planned or already trading in Australia, London, Hong Kong and across Europe - is designed to give large investors the means of owning actual bullion in their portfolios. Individuals also would be able to trade the Equity Gold Trust, which would trade under the symbol GLD (GLD: news, chart, profile).
"The trust holds gold and will from time to time issue baskets in exchange for deposits of gold and distribute gold in connection with redemptions of baskets," the S-1 filing says. "The investment objective of the Trust is for the shares to reflect the performance of the price of gold bullion, less the trust's expenses. For many investors, the shares will represent a cost effective investment in gold."
Gold's spot price last week surpassed $390, paving the way for what bullion experts say will be a $400 gold price for the first time since March 1996.
The World Gold Council, which is paid by gold producers and other members to promote gold, has long been seeking ways to drum up investment demand for the precious metal. At present, there is no exchange-traded fund representing a commodity that changes hands in the United States.
Yet the gold council's efforts, spearheaded by its chairman, Thompson, the former chief executive of South African miner Gold Fields Ltd. (GFI: news, chart, profile), and by new council CEO Jim Burton, hit a brick wall this past summer. Equity Gold Trust got caught in a hornet's nest of regulatory issues, including concerns about the custody of stored gold, as well as the fund's tax status and a head-butting turf battle with the Bank of New York, which hopes to lead the way in the field of securitized commodities. See CBS MarketWatch exclusive: Paper gold must leap hurdles.
Now, with Bank of New York named as the trustee, gold council members and fund managers tell me the proposed fund is on track to generate enough demand for several hundred metric tons of the metal, and perhaps more. The fund's backers are still shrouding their marketing plans in secrecy, crossing their fingers that the new registration statement with American regulators sparks no more new questions.
"All the World Gold Council types were pretty tight-lipped in Denver," Tocqueville Gold Fund (TGLDX: news, chart, profile) manager John Hathaway told me. The council had hoped to tell members at the Denver Gold Show last week that the new fund would begin trading on the NYSE imminently. "They are taking no chances on any leaks."
The World Gold Council's Equity Gold Trust would mark the second commodity-linked security to grace the floors of a stock exchange. The first, Gold Bullion Ltd.'s Australia-traded security (AU:GOLD: news, chart, profile), is already meeting brisk demand for so-called "paper gold."
The prospect of paper gold has gold believers titillated. But the administration of such a product required coordination among bank vaults, electronic data centers, custodians, trustees, buyers, sellers and regulators.
At the heart of the day-to-day running of a gold exchange-traded fund would be Bank of New York, the trustee. The bank, according to the prospectus, would have to "monitor the trust's on-going expenses and sell the trust's gold as needed to pay the trust's expenses (gold sales are expected to occur approximately monthly in the ordinary course), calculate the net asset value of the trust and receive and processing orders from authorized participants to create and redeem baskets and coordinating the processing of such orders with the custodian and the Depository Trust Co."
The proposed trust's backers hope to create what many are calling the QQQ (QQQ: news, chart, profile) of gold in reference to the Nasdaq 100 exchange-traded fund that has been enormously popular with investors.
(imho, the difference is that the QQQ is backed by a game of musical chairs, while the gold fund will be backed with pure solid gold)
Complete story:
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