Hi PH, If I read this right, it seems to me that one major difference between the US based Gold ETF's and the proposed Indian based ETF is that the New Delhi based funds are admitting that they won't necessarily back up the fund with 100% ownership of the bullion value of the fund ownership. Their liberal useage of the word "scheme" is enough to make one suspicious, eh?
Gold ETF's in India Will NOT have to Keep All their Metal on Hand
By: Chris Powell, GATA
Dear Friend of GATA and Gold: The following commentary from the Economic Times in New Delhi about exchange-traded funds for gold in India confirms that such funds will not have to keep on hand all the gold they claim to have and thus may become new agents of the scheme to suppress the gold price.
The key assertion by the commentary's author, Puneet Jain, is this: "While gold fund managers could undertake trading to enhance the net asset value, yet it would be largely determined by the price of gold in the international markets."
Thus the gold price suppression scheme seems to realize that Indian demand for gold is the greatest immediate threat to the scheme and that the scheme can continue only by diverting that demand away from real metal into paper promises.
CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. http://news.goldseek.com/GATA/1110147537.php ==============================================================
The article Powell is referencing is:
Stockistics: Gold
Puneet Jain TIMES NEWS NETWORK March 07, 2005 12:10:12 AM
Finance minister P Chidambaram's budget has managed to propel stock indices to new highs despite offering little by way of concessions on the fiscal front.
Market's euphoria appears to stem from the sense of relief among investors that the FM has not rocked the boat in terms of the benign tax treatment given to income from investment in stocks.
We believe that easy liquidity conditions will continue to prevail for the stock markets and there would be plenty of foreign and domestic money chasing India stocks over the next few months. Therefore, short blips notwithstanding, stock markets appear to be headed higher in the near term.
As anticipated by us in the run-up to the budget, the big beneficiaries of government's fiscal policy appear to be companies in agri sectors like sugar, tea, coffee and fertilisers. Textiles and leather products companies too have received liberal handouts from the government and should do well in the coming years.
An interesting feature of this year's budget has been the decision by FM to allow gold-traded funds. These funds will be exactly like mutual funds with the only difference that while mutual funds invest in equities, gold-traded funds would buy gold for an amount equal to their corpus.
For example, if there was a gold-traded fund that offers units of the face value of, say, Rs 100, then investors could put in as little as Rs 100 for buying a small part of this gold fund and get the same degree of appreciation as the larger corpus.
We spoke with some potential fund managers who could float such schemes and they pointed out that the entry and exit loads on such units could be very small, as little as 0.25%, since gold is highly liquid and fund management in this case would be passive as the NAV would be linked to the price of gold alone.
While gold fund managers could undertake trading to enhance the NAV, yet it would largely determined by the price of gold in the international markets.
Another interesting aspect of the proposed scheme could be that it could itself lead to a rise in prices of gold. My estimate is that as much as Rs 5,000 crore could be collected by such schemes in India since gold is extremely popular with Indian investors and the risk involved is also low, placing it at par with debt
There’s sense in silver too
This huge corpus could generate massive demand for gold in India leading to higher prices globally. Let's see if I am right!
One only hopes that the market regulators would issue guidelines for the gold funds quickly and allow the funds to be floated as early as possible. A large number of asset management companies are eager to float the scheme and tap a whole new market.
Government could also consider permitting similar funds for investing in silver as well, since silver too is a good hedge against inflation and unexpected crisis in financial markets.
While stock markets will continue to provide exciting times for investors, investments in gold funds should be used as a measure of prudence and risk management
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