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Portfolio > ETFs

Interest in Gold Shares Peaking, Says Trust Exec

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ETF Securities USA said ETFS Physical Swiss Gold Shares (SGOL) had a record day’s trading volume on August 11 of 1.74 million shares or $208 million. This represents the greatest one-day volume since its first U.S. trading day on September 9, 2009.

“The fact that there is buying of gold in a quiet month may tell us something about what is expected to happen in the next two quarters,” said William Rhind, strategic director of U.S. business development for ETF Securities USA, in a phone interview.

“Investors [and investment advisors] are concerned about a potential douple dip in the economy,” Rhind explained, “and how it will affect their clients’ wealth more generally.”

The largest holders of SGOL, he adds, are large mutual-fund providers and wirehouse broker-dealers.

“We are seeing more interest from investors as the market environment remains uncertain,” said Rhind. “Advisors want to see some asset allocation into hard assets that are not correlated with equities and bonds. Gold and other precious metals generally provide that solution.”

The ETFS Gold Trust trades like an exchange-traded fund; it is legally structured as a trust – and not a mutual fund — because it does not invest in stocks or bonds. Rather, it invests in physical bars of gold, which are held and audited in Switzerland by JP Morgan Chase.

The popular SPDR Gold Shares (GLD) also invests directly in bullion, which is held at HSBC Bank USA in London. Its marketing agent is State Street Global Markets.

The distributor for SGOL is ALPS Distributors, which also distributes the Select Sector SPDRs ETFs managed by State Street Bank & Trust.

Some gold products, says Rhind, get their bullion exposure through the use of derivatives.

In addition to the ETFS Gold Trust, the company also offers investors the ETFS Silver Trust, ETFS Palladium Trust and ETFS Platinum Trust.

SGOL had some $695 million in assets as of August 13, says ETF Securities USA. Its average daily trading volume has been roughly 170,000 shares, according to various financial news sources.

GLD has some $48 billion in assets and has average daily trading volume of roughly 12.6 million shares.

In the second quarter of 2010, gold prices rose about 12%, while the major markets declined by about 6-12%. Gold prices in July, however, weakened. In mid-August however, gold futures hit a six-week high.


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