amarksp00, to continue our watch and brief here Message 22135679
Coincidence, no doubt ... perhaps a first of many steps sg.biz.yahoo.com
FOCUS: China Fund Tipped To Boost Global Gold Sentiment
By James Attwood
Of DOW JONES NEWSWIRES
SYDNEY (Dow Jones)--Gold's four-year uptrend is expected to gain further impetus if China proceeds with plans to launch gold investment funds.
The move would increase market access to one of the world's growing regions of gold consumption; boost sentiment; and possibly be the first of several such funds, analysts say.
"It's going to increase demand and add to the recipe for higher prices," said Alastair McIntyre, director of precious metals at ScotiaMocatta in Hong Kong.
Thursday, China's gold association revealed plans to issue a CNY1 billion (US$124 million) fund this year through private placement or public offering, under the management of China Gold Investment Fund Management Co.
Details are scarce, but the fund is apparently designed to boost liquidity in the local market and possibly give local investors access to international gold futures.
If successful, it may be the first of other, similar commodity-investment vehicles.
The launch of exchange-traded gold funds in western markets has given more access to individual and institutional investors, helping drive prices to 25-year highs against a backdrop of building geopolitical and inflationary concerns.
Depending on how China's version is structured, it has the potential to tap pent-up demand among larger investors who balk at the risks and complications of physical gold hoarding, traders and analysts said.
China's physical gold demand grew to around 12 tons last year from just under 10 tons in 2004, with indications this year's figure will be higher again, according to London-based precious metals consultancy GFMS.
Recently launched retail bank gold products in the country have been well received, with a reported 1.7 tons sold of a commemorative Olympic gold bar.
"The demand is certainly there, it's just a matter of whether they can funnel it into those funds; I imagine they probably can," said Darren Heathcote, head of trading at Rothschild Australia.
However, traders and analysts said that for now, the fund's impact on global gold markets is likely to boost sentiment - rather than be a key price driver in the way that Barclays Capital's proposed exchange-traded fund for silver is driving prices of that metal.
The extent of the sentiment boost depends largely on the fund promoters' ability to gain an exemption from the country's current ban on local institutions investing in international financial markets.
Some analysts also question whether domestic investors would be as trusting of an investment vehicle like an ETF in China's evolving market as their counterparts in more established markets in the west.
"On the other hand, it makes sense from a prudential regulatory point of view because there are a lot of regulatory issues and this is perhaps one way of cutting out all the middle people," said Jonathan Barratt, head of foreign exchange and metals at Tricom in Sydney.
Another factor governing the extent of the fund's impact on global market sentiment is its size.
"My initial reaction is positive because China is a big market and it may only be the first of many more," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong. |
