Updated: Nov 8,2004

Gold Exchange-Traded Funds (ETFs) November 8, 2004 A new way to invest in gold is about to be approved by the SEC, and this will allow individual investors as well as large pension funds that have been banned from buying commodities directly, to invest in gold through the Exchange Traded Gold Funds, operated by the World Gold Council and State Street Securities. 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. This will also alleviate the worrying about storage of bullion, insurance or transportation costs, or (my favorite) risky gold futures and the associated dread of untimely margin calls. The product, which may be listed by the end of the year (2004) 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. Similar to a traditional mutual fund, a Exchange Traded Funds (ETFs) is an investment structure that pools the assets of its investors and uses public indexes (in this case published gold price) to invest the money (purchase gold) to meet clearly identified objectives, such as current income or capital appreciation. An ETF is created by a institutional investor that deposits securities (or gold, in this case) into the fund in return for creation units (shares). In return for the deposit, the institutional investor receives a fixed amount of shares, some or all of which may be traded and priced throughout the day on a stock exchange where the fund is listed (New York Stock Exchange (NYSE) for example). The World Gold Council is financed by some of the world's largest gold mining companies. There will be fees associated with the gold EFT, similar to mutual fund fees, and strategies usually associated with buying and selling stocks should apply to the gold EFT's. Check with your investment advisor or broker for more technical information related to this Fund, as I am not an expert in this department, but I do recognize a good thing when I see one, and this looks like a good thing to me. Now, it will be easier to diversify the portfolio, without having to lug the 50 Kg bar to the safety deposit box, after it is delivered by the UPS driver, wondering what is in that little, heavy container. My question is what catchy phrase will be on the certificates, perhaps "In Gold We Trust"?

But that's just my opinion. Charles Kubach Mine-Engineer.Com Return To Gold Page