european gold fund to start end 2005

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    Gold-backed securities seen on Euronext by end-2005

    European investors will get access to gold-backed securities that allow them to buy a share in a bar of bullion soon, with a listing on the pan-European exchange Euronext seen by the end of this year.

    Gold Bullion Securities managing director Simon Village said the Euronext listing would enable much wider access to paper-backed gold.

    "What we wanted to do was make gold accessible, cost- effective and efficient," he told Reuters in an interview on Thursday, adding that due diligence was also underway to explore a listing in Asia.

    Exchange-traded funds (ETFs) are a relatively new type of investment that are traded on stock exchanges around the world, including London, New York and South Africa. GBS first listed on the Australian Stock Exchange in March 2003.

    The UK-listed GBS is the only gold-backed fund listed in Europe so far. The listing on Euronext would be the second.

    Collectively, the funds have accumulated 236,38 t of metal worth just under $3,3-billion, Village said.

    Flow into ETF products had been helped by a robust gold price. Spot gold is currently around $430 per ounce, having hit a sixteen-and-a-half year peak last December at $456,75.

    While analysts have hailed the growth of ETFs, particularly the US-listed StreetTRACKS gold fund and COMEX Gold Trust, they note weakness in capturing a significant swathe of smaller, retail investors.

    "I accept that we probably haven't completed the mission of getting gold right down to the retail level," Village said, but added there was some evidence of retail buying.

    "I think what we still need to do is open up the distribution channels and make sure that the brokers are well educated to be able to offer the product to their clients," he added.

    Village said retail investors still needed to really understand the benefits of gold ownership, something which the industry-backed World Gold Council was set to address.

    Further steady growth in ETFs would come from wider distribution networks and flows from wider investor interest in commodities as an asset class, he said.

    Village also noted holders of the securities subscribed largely to buying and holding their investment - which meant the ETFs did not necessarily reflect the ebb and flow of speculative trade that has driven gold prices recently.

    "What you've seen is that a lot of investors have bought the ETF to hold it, not to trade. Therefore despite the fact that gold does pull back and some of that retracement is speculative activity, it doesn't correlate with an immediate withdrawal of gold from the trusts," he added.

    Each GBS share represents 1/10 of an ounce of gold. Shares were quoted at $43,05 by 12:51 GMT, up $0,35 on volume of 5 000.

    The price was indicated at $40,90 at the LSE market close on December 9 when it debuted.


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    Published: 2005/05/06 Printer friendly:

    Author: Reuters
    Portfolio: writer
    E-mail: [email protected]

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