China Eyes Gold ETFs

November 28th at 8:15am by Tom Lydon

Gold ETF holdings of bullion are at all-time highs and the exchange-traded products have played a role in the precious metal’s historic rally the past few years. Now, China is considering launching its own gold ETFs that could create more demand for the metal.

Several fund companies in China are readying ETFs to follow gold prices that would let more individuals invest in the precious metal. [China Fund Managers Prepare Gold ETFs]

Earlier this year, Hang Seng Bank launched the first yuan-denominated gold ETF in Hong Kong. [First Yuan-Denominated Gold ETF Begins Trading]

The closest match for anything like Chinese gold ETFs is the ETFS Physical Asian Gold Shares (NYSEArca: AGOL), reports Jared Cummans for Commodity HQ.

“As the domestic market matures and opens up, the exchange will launch over-the-counter trading, gold ETFs, Friday night trading and improve the leasing market,” Wang Zhe, Shanghai Gold Exchange president, said in the report. He added he had no doubts that gold ETF products would make their way onto Chinese exchanges.

China is on schedule to surpass India as the top consuming nation of gold in 2012, indicating the Shanghai Gold Exchange is planning its launch in a timely fashion. For now, the focus is on spot contracts and physical bullion. Forward, or futures contracts will be included in ETFs later on, reports Rujun Shen and Polly Yam for Reuters.

“Later on, we will further open up the market and quicken the steps to integrate into the international market,” Xie Duo of People’s Bank of China said. “We should actively create conditions for the gold market to become integrated with the international gold market.”

Investors used exchange traded products like SPDR Gold Shares (NYSEArca: GLD) to purchase 247.5 metric tons of gold this year, which is more than annual U.S. mine output, Bloomberg reports.

Exchange traded products hold about 2,604 tons of bullion valued at roughly $145 billion.

Gold ETFs let individuals and fund managers trade and invest in gold without the costs of transporting, storing and insuring the precious metal. [Hedge Funds Buy Gold ETFs]

ETFS Physical Asian Gold Shares

 

Tisha Guerrero contributed to this article.

Full disclosure: Tom Lydon’s clients own GLD.

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