Gold ETFs expected to start in India within month


From Press Trust of India
Monday, January 10, 2007

MUMBAI -- Traditional household investment in gold will soon have a new option with the much awaited gold exchange-traded funds (GETFs) expected to be launched within a month.

"The GETF hopefully should be launched within a month," Association of Mutual Funds in India Chairman A.P. Kurian told reporters.

As per reports three mutual funds, Benchmark Mutual Fund, UTI Mutual Fund, and Kotak Mutual Funds have already filed offer documents for gold funds with the market regulator.

"Some of these funds will be launched positively before end of this financial year," he said.

Through GETF people can inveset in gold in small amounts over a period of time. And when they want to sell, they can either get gold or simply sell the units, he said.

A minimum of one gram of gold can be bought or sold through the schemes, enabling even the poor to buy the precious metal and plan their future needs, like buying wedding jewelleries.

The new fund will track international gold prices like the one prevailing on London Metal Exchange, Kurian said. SEBI has directed mutual funds to outsource services of a custodian for storage of physical gold from a third party since fund houses have no practical experience in storing the precious metal -- usually a custodian bank's job, he said.

In fact, Kotak Mutual Fund has already designated Deutsche Bank AG and Standard Chartered Bank as custodians for the proposed GETF scheme.

The appointed custodians will buy and sell gold as investors look at positions in the ETF.

Such a move will enable any household to buy and sell gold in units for as little as 1,000 rupees and these units could be traded in the same manner as mutual fund units, he said.

In UTI's proposed fund the units issued will be referred to as UTI Goldshare.

Investors who want a cost-effective and convenient way to invest in gold can get an instantaneous exposure to the physical asset.

Its units can be traded like a share and one can buy and sell them quickly at ruling market price, unlike physical gold, which can be sold only for a discount and by a cumbersome process.

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