A new way of investing in gold will be on offer next week through buying and selling a security on the London Stock Exchange.
Gold Bullion Securities will offer units of a tenth of an ounce, and the gold that investors buy will be stored in HSBC vaults and held in trust.
The initiative is backed by the World Gold Council, an association for the gold-mining industry that wants to encourage investors to buy the precious metal.
Previously investors were deterred from buying bullion because they had to find a place to store the gold, while institutions were not allowed to own physical commodities, making it difficult for them to invest.
On Monday gold prices went past $400 an ounce for the first time since 1996 but analysts expect prices to move back to about $350 this year and next.
Gold is traditionally seen as a haven for investors, so its price tends to increase when they are nervous about the economy and fear equities and bonds.
The new method of buying gold should be similarly priced to the wider gold market. ”Because the trust is transparent, the price should mirror the stock price less the fees charged to the trust,” said Simon Village, joint managing director of Gold Bullion Securities. ”The [people] who will buy initially will be those who believe the gold price will go up.”
To cover the storage of the gold, insurance and administration, a management fee of 0,3% will be charged on each trade. The security will be priced in United States dollars, and trading will begin on December 9.
Deutsche Bank, JP Morgan, HSBC and UBS Warburg intend to be market-makers for the security. A similar method of buying gold was set up in Australia, which Village points out is a smaller investment market than London, in March. Now it has eight tonnes of gold in the trust, worth more than $800-million.
”We believe there is a long-term demand from the investment market to get access to gold,” said Village. — Â