China Prepares First Gold ETFs

ETF Trends

A Chinese asset manager wants to gather $400 million of initial funding for one of China’s first two gold ETFs, according to a report Monday.

The gold ETF will be listed on Shanghai Stock Exchange and track the performance of spot contracts on the city’s gold bourse, Bloomberg News reports.

Huaan Asset Management Co. has yet to set a date to market the fund to investors, according to the story.

Bullion-backed ETFs have seen assets decline this year on investor outflows and lower gold prices. The largest ETFs in the U.S. include SPDR Gold Trust (GLD), ETFS Physical Swiss Gold (SGOL) and iShares Gold Trust (IAU). [Gold ETFs: Six Straight Months of Outflows]

Gold prices have dropped below $1,400 and the ETFs are down about 17% year to date. [Traders See Gold Bargains as ETFs Shed $45 Billion]

However, demand for physical gold has been strong in China with the pullback viewed by some as a buying opportunity.

“Gold hasn’t lost its appeal as a store of value in China,” said Xu Yiyi, the fund manager who will run the ETF, in the Bloomberg article. “Investors here usually like to buy on dips, so a decline in the bullion prices this year should work in our favor.”

Huaan and Guotai Asset Management Co. this month received regulatory clearance to start domestic exchange traded products backed by gold, which will be denominated in yuan, according to the report. [China Readies Gold ETFs]

Full disclosure: Tom Lydon’s clients own GLD.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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