India approves exchange-traded funds for gold

Section:

From Press Trust of India
via NewKerala.com
Tuesday, January 16, 2007

http://www.newkerala.com/news4.php?action=fullnews&id=80212

MUMBAI, Jan. 15 -- Market regulator SEBI today gave a go-ahead to mutual funds for floating gold exchange-traded funds (GETF), thus enabling the investors to trade in gold as shares in the stock market.

In a notification, SEBI said: "The gold held by a gold exchange-traded fund scheme shall be valued at the AM fixing price of London Bullion Market Association (LBMA) in US dollars per troy ounce for gold having a fineness of 995.0 parts per thousand." The Custodian of Securities Act has also been amended, enabling custodians of the proposed gold funds to outsource safekeeping of bullion to other agencies.

But SEBI made it clear the custodians would be responsible to its clients (mutual funds) for safekeeping of the gold kept with other person, including any risks.

"This is an encouraging development. Common investors will be able to buy and sell gold in small amount at leading bourses," Association of Mututal Funds of India (AMFI) Chairman A P Kurian.

This would help in diversifying investment and risk by the investors, he added.

UTI MF and Benchmark have already submitted draft offers for GETF and are awaiting SEBI's nod to launch these funds.

The GETF will track the price of gold. Its appointed custodians will buy and sell gold bullion as investors look at positions in the ETF.

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