SEC close to backing new gold product
By Kevin Morrison in London
Published: November 8 2004 02:00 | Last updated: November 8 2004 02:00
The long wait for a new listed gold investment product backed by the World Gold Council and State Street Securities may soon be over, with the US Securities and Exchange Commission expected to approve the product, a first of its kind to be listed on a US stock exchange.
The WGC, an industry body financed by some of the world's largest gold miners, and State Street, the US group, are expected to meet next week to finalise details of a marketing programme for the new product, which will allow investors to buy gold without worrying about storage, insurance or transportation costs, or the risk of margin calls associated with gold futures.
Precious metals traders and fund managers said talk of an imminent approval from the SEC was a factor behind the run up in the bullion price to a 16-year high of $433.90 a troy ounce on Friday as hedge funds were taking positions in the futures market last week in anticipation of the launch of a new product.
The gold investment instrument will be an exchange traded fund (ETF), which are very popular for US investors as they track stock indices for a lower cost than index-based managed funds.
The product, which may be listed by the end of the year on the New York Stock Exchange, will be an open-ended fund and track the gold price, with each unit equal to one-tenth of an ounce of gold.
If approved it would end an 18-month wait for the London-based WGC, which first filed for the product originally called Equity Gold Trust in May 2003. One of the factors why it has taken so long is because it represents a landmark decision for the SEC.
There is no investment product listed on a US stock exchange that is backed by a commodity because pension funds are largely prohibited from taking a direct investment in a commodity. It could also potentially pave the way for more ETF-style funds backed by commodities.
Barclays Global Investors has also filed a gold ETF investment proposal with the SEC.
Another factor that the SEC had to overcome was the fact that the new gold investment product was to be controlled by the WGC, an industry advocate. However, it is understood that WGC plans to eventually sell the company that will administer the ETF to State Street.
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