By Kevin Morrison –
Gold prices on Wednesday nudged a fresh 16-year high as investors prepared for the launch of a fund that will track the price of the precious metal.
The fund, which is owned by the World Gold Council, on Monday lodged with the Securities and Exchange Commission the last registration statement that must be filed with the US securities regulator before a new investment issue is listed.
The World Gold Council is funded by some of the world’s biggest gold miners.
The fund, called Streettracks Gold Trust, will be distributed and marketed by State Street Securities, the US financial services group, and is expected to be listed on the New York Stock Exchange by the end of the year.
Officials at the World Gold Council did not comment on the Streettrack Gold Trust. However, investment funds said they had been contacted by banks associated with the new gold investment fund about presentations for the product later in the month.
This is the strongest indication thus far of long-awaited approval from the SEC. The council originally launched a gold investment prospectus with the regulator in May 2003.
Streettracks Gold Trust is an exchange traded fund, a form of investment popular with US investors as they track stock indices for a lower cost than index-based managed funds. It will be an open-ended fund and track the gold price, with each unit equal to one-tenth of an ounce of gold.
The filing of the product has been marred by legal wrangles. It represents a landmark decision for the SEC because no investment product listed on a US stock exchange is backed by a commodity. This because pension funds are not allowed to invest directly in commodities.
The structure of the fund mirrors other gold investment funds listed in London, Australia and Johannesburg. But the US holds the largest pool of potential investors in gold.
It is home to the biggest listed gold miner in the world, Newmont, and gold futures are traded at the Comex exchange in New York.
Comex gold futures celebrate 30 years of trading this week, and open interest (contracts that have not been closed) has reached a record level of 300,000 contracts.
Traders said talk of the new gold ETF and the record open interest in Comex gold were bullish signals for the gold price, which yesterday hit a fresh high for the fifth day in succession. Bullion hit a high of $437.25 per troy ounce on further dollar weakness before settling at $433.95/$434.70 in late London trade.
A London-based gold trader said: “Rumours of the imminent launch of Gold ETFs on the New York Stock Exchange fuelled the buying in gold. Traditional gold traders expect pent-up, fresh buying interest in these instruments from US mutual funds that have previously been excluded by their charters from buying physical gold.”
Source: Financial Times