If Dow triples, gold may rise tenfold, Marc Faber says

Section:

Coming soon: Funds for trading in gold;
Firms gear up for funds that will invest
in gold exchanges within two months

By Anand Birai
Mumbai Mirror
Tuesday, April 25, 2006

http://www.mumbaimirror.com/nmirror/mmpaper.asp?
sectid=13&articleid=42420062234418742420062233531

MUMBAI -- If you love to invest in gold, then you will soon be able
to do the same without physically owning one gram of the precious
metal.

This mode of investing in bullion has now become a pheasible and a
paper-based reality thanks to the Securities and Exchange Board of
India (SEBI) finally issuing notifications to mutual fund (MF)
companies about gold funds.

The Association of Mutual Funds in India (AMFI) has already gone
public with this development and expects gold funds to hit the
markets in about two months. Just like regular mutual funds trade in
equities and government securities, the proposed gold funds will
also invest in gold exchanges.

According to the market players, Gold Exchange Traded Funds (GETF)
would enable investors to buy and sell gold at market prices,
something that SEBI has also hinted at, and be marked to the
exchanges on a daily basis.

This would eliminate botheration of keeping gold in safe custody
and, obviously, enhance liquidity.

In case you did not know, the market price of gold in the domestic
market on any business day would be arrived at by a simple
calculation:

Domestic price of gold =(London Bullion Market Association fixing
the price at US dollars per ounce X Conversion factor for converting
ounce into kg for 0.995 fineness X Rupee rate as against the dollar)
+ Custom duty for import of gold + Sales Tax/Octroi and other levies
applicable.

Several mutual fund companies had been in close consultations with
the World Gold Council for about a year now to understand the
logistics of the gold market and its dynamics.

"We have been working with some leading Asset Management Companies
(AMCs) and are finalising how the GETF can be shaped. With gold
funds, investment demand for gold might reduce as investors will be
having an alternative option for investing in the metal," Sanjeev
Agarwal, Managing Director of the World Gold Council (Indian
subcontinent) told Mumbai Mirror.

However, the exact mechanism of how the mutual funds would be
operating in gold market has not been known yet.

"I have not seen the notification. However, AMCs might follow the
model of being a custodian of gold or trade like in the futures
markets or just operate on basis of delivery receipts," said Sanjay
Santhanam, Vice-President (Marketing & Sales) at Sundaram Mutual.

JM Financial Assets Management Private Limited was one firm that was
believed to be on the verge of launching such a fund. But its Fund
Manager Biren Mehta said that they have not yet filed any documents
with SEBI. "Hence, I cannot comment on the final model of our
proposed gold funds," he said.

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----------------------------------------------------

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----------------------------------------------------

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