What Is a Gold ETF?

Gold ETF (Exchange Traded Fund) refers to an open-end fund where most of the fund's assets are invested with gold as the underlying asset, which closely tracks the price of gold and is listed on the stock exchange.

Gold ETF

The Gold ETF Linked Fund closely tracks the performance of China's gold spot prices mainly by investing in target ETF fund shares. In June 2013, the China Securities Regulatory Commission approved the issuance of Huaan Yifu Gold Trading Open Securities Investment Fund and Linked Funds, and the first batch of gold ETF linked funds were launched.

The fund mainly invests in target ETF fund shares and gold varieties such as gold spot contracts traded on the Shanghai Gold Exchange. In addition, the fund can also invest in fixed income securities, money market instruments, and other financial instruments permitted by the laws and regulations or the China Securities Regulatory Commission. Under normal circumstances, the proportion of the Fund's investment in the target ETF is not less than 90% of the fund's NAV, and cash or government bonds with maturity within one year is not less than 5% of the fund's NAV.

Fund Features and Investment Costs

1. The Gold ETF Linked Fund is equivalent to the "certificate" of gold held on the Shanghai Gold Exchange, with national credit.

2. Compared with other gold investment methods, the investment starting point of Hua'an Gold ETF Linked Fund is only 1,000 yuan, investors can purchase and redeem freely, and the barrier to entry is low.

3. The gold ETF fund mainly provides a convenient gold investment channel for investors who are accustomed to buying and selling gold through the secondary market (stock market), while the gold ETF connection fund is configured to use the direct sales platform and bank outlets of fund companies Investors in gold assets provide a more convenient way to buy.

Suitable for investors

Differentiated product rate design can meet the needs of different investment periods. Long-term investors can choose a class A share and hold a redemption fee for more than one year; a band operation investor can choose a class C share and hold it for more than 30 days without redemption fees. If the investment is exactly 30 days, the transaction cost is only The service fee for sales is 0.03%, which is cheaper than other gold investment methods. ^[3]

1. High mobility, escorted in AP mode to ensure high mobility

The gold ETF market maker in AP mode is obliged to make the market, the secondary market is more liquid, the impact cost is low, and it can provide bulk trading services! Non-AP market makers have no obligation to make markets.

2. Low threshold, about 300 yuan per lot per transaction

The trading unit is 1 lot of 1 gram of gold, and the gold exchange starts from 50 grams!

3. Less fees, transaction costs are much lower than physical gold handling fees

Transaction commissions are equivalent to stock ETFs, ranging between 0.03% and 0.08%, while commercial exchange agents on the Gold Exchange are generally 0.2%!

4. Once configured, the securities account can directly buy and sell gold

After the securitization of gold assets, investors can more easily participate in gold investment! You can configure and trade gold on the market!

The so-called gold ETF fund refers to a financial derivative product that uses gold as a base asset to track spot gold price fluctuations. It is still virgin in mainland China. Domestic investors know very little about gold ETF funds, but gold ETF funds are extremely popular in overseas markets.

The operating principle of the gold ETF is that large gold producers consign physical gold to fund companies, and then the fund company relies on the physical gold to publicly issue fund shares on the exchange to sell to various investors. Commercial banks serve as fund custodians and physical objects. Custody bank investors are free to redeem during the life of the fund

Gold ETFs are listed on the stock exchange. Investors can trade gold ETFs as easily as buying and selling stocks. Low transaction fees are a big advantage of gold ETFs. Investors can buy gold ETFs without the gold storage fees, storage fees, insurance costs and other fees The management fee paid is usually about% to%. Compared with the average% to% of other gold investment channels, the cost advantage is very prominent. In addition, the gold ETF also has the advantages of strong security and liquidity.

Due to the higher price of gold, gold ETFs generally use grams as a fund unit. The net asset price of each fund unit is the spot gold price minus the accrued management fees. Its transaction price on the securities market or the secondary market price is based on the net asset price per share.

In order to stimulate investment in the world gold market, stimulate global gold demand,

As the founder of the Gold ETF, Dr. James Burton, CEO of the World Gold Council, defined it as the consignment of physical gold to fund companies by large international gold producers, which were subsequently publicly issued by the fund companies on the stock exchange to rely on. Gold physical funds are sold directly to various investors, including institutional and individual investors. At the same time, designated commercial banks serve as fund custodians and physical custodians respectively, and investors can freely redeem them at any time. New gold investment.

Gold ETFs are open-ended investment funds. Investors can continue to quote during trading hours, buy and sell freely, and redeem them at any scale according to their own judgment on the market. Although listed on different exchanges around the world, there are no essential differences between the four ETFs, except that they are slightly different in issuing companies, fund custodians and physical custodians. Take the gold ETF (trade code: GLD) listed on the New York Stock Exchange as an example. The product is directly listed and issued by streetTRACKSGoldShares fund company, and the underlying gold is purchased from Newmont Gold Group. Each share of the gold ETF issued represents 1/10 ounces (approximately 3.1 grams) of physical gold, and the minimum order quantity is 1 share. The ETF's custodian is the Bank of New York, which is responsible for the daily management of the fund; the physical custodian is HSBC, which is responsible for the physical gold behind each ETF. The difference between the gold ETF (trade code: GBS) listed on the London Stock Exchange is that the issuer and the custodian bank are different. The institution that issues the GBS is GoldBullionSecurities Fund Company, and the custodian is UBS Bank of Switzerland.

According to statistics from the World Gold Council, as of March 31, 2006, the total trading volume of gold ETFs listed in the United States, the United Kingdom, Australia and South Africa has reached 437.65 tons, with a transaction value of 8.194 billion US dollars. Among them, the gold ETFs listed on the New York Stock Exchange and the London Stock Exchange are the most active, with trading volumes of 34.82 tons and 70.5 tons of gold, respectively, with a total value of $ 6.506 billion and $ 1.325 billion. The advantages of gold ETFs and the reasons for their successAs a new, simple, efficient, and safe way to invest in gold, gold ETFs can quickly gain market recognition in a short period of time, mainly due to the following two reasons:

First, the advantages of the gold ETF itself

The easy-to-operate gold ETF is traded on the stock exchange. Institutional or individual investors can purchase gold-based gold ETF products directly or through brokers, so that gold can be mixed with traditional asset classes such as stocks and bonds in investment portfolios. The high-security gold ETF represents part of the fund's indivisible beneficiary rights and ownership, and the physical gold behind it is stored by a commercial bank with good reputation. Because of trading on the stock exchange, it is subject to strict supervision by the exchange, and relying on the exchange's advanced trading system, transactions are safe and reliable. Low threshold For investors, especially individual investors, the cost of buying and selling gold ETFs is much lower than the cost of buying, selling, holding and insurance under traditional designated gold accounts. Especially its 1/10 ounce, or about 3.1 grams of trading threshold is more attractive for individual investors. High transparency gold is traded 24 hours worldwide, and the price of gold is open and transparent. The fund custodian calculates the net asset value and other relevant financial information every day and promptly discloses it to investors on its website.

Choice of listed market and other objective reasons

The World Gold Council has special considerations in choosing to launch gold ETF products on stock exchanges in the United States, the United Kingdom, Australia and South Africa. First, there is no over-the-counter market in these countries that specializes in spot gold trading. Take the United States and the United Kingdom as examples. Although the New York Mercantile Exchange and the London Gold Market are currently the world s largest gold futures and spot markets, respectively, the New York market is geared toward institutional investors, and the London market is also an OTC OTC market, so personal investment It has been difficult for investors to participate in gold market investment. At the same time, as U.S. law stipulates that pension funds and mutual funds cannot hold spot commodities or their derivatives, including precious metals such as gold, platinum, and silver, the launch of the gold ETF is for investors, especially individual investors and previously unable to participate. Institutional investors in gold investment have created great convenience, so once it was launched, it caused a sensation and quickly developed.

Coming soon gold

Once the gold ETF was born, it triggered a subscription boom around the world, and the amount of gold it held continued to rise. As of January 24, 2013, the world's largest and most liquid gold ETF, SPDR Gold Trust, had total assets of US $ 71.521 billion and held 42.815 million ounces of gold (equivalent to 13.317.11 tons).

The risk-return characteristics of gold and traditional assets are significantly different, and the correlation is low. Through correlation analysis, we found that the lowest correlation between gold and the US stock market is 0.02, of which the correlation coefficient with the Dow Jones Industrial Average is -0.01 and the correlation with the S & P 500 index is 0.03. The correlation coefficient between gold and emerging country stock markets is 0.26, slightly higher than that of the United States. Gold has the highest correlation coefficient with commodities that are also denominated in US dollars, of which the correlation coefficient with Brent crude oil is 0.40 and the correlation coefficient with DJ-UBS commodity index is 0.43.

Since the emergence of the first gold ETF overseas in 2003, due to its low investment threshold, convenient transactions, high security, strong liquidity, and keeping up with the trend of gold, it has ushered in rapid development. In contrast, the development of China's gold market is still in its infancy, with a single type of gold investment. The introduction of China's gold ETF is of great significance to the gold market and fund market.

First, it is in line with national strategies. As the second largest economy in the world and the largest holder of US Treasury bonds, the internationalization of China's renminbi is imperative, and the central bank must hold more gold to spread the risk of foreign exchange reserves. The launch of the gold ETF can quickly expand the scale of "hiding gold with the people", thereby increasing the country's broad gold reserve.

Secondly, this will help increase China's influence in world gold pricing. China is both the world s largest gold producer and the world s largest gold consumer. Although Chinese demand has become an important factor in international gold prices, gold pricing power is still in the hands of European and American markets. The scale change of overseas gold ETFs has always been an important indicator of international gold prices. The innovative development of China's gold ETFs will accelerate the common development of domestic spot gold markets and futures gold markets, and increase China's international influence in world gold pricing.

Furthermore, this can enrich the choice of investment channels and tools. China has limited ways to invest in gold, including paper gold, gold T + D, gold futures, gold stocks, and gold QDII funds, etc. The introduction of the gold ETF will enrich investors' investment channels and improve the efficiency of on-site fund asset allocation. The correlation between gold and the A-share market is low. A certain percentage of gold assets can optimize the investment portfolio and diversify investment risks. For example, during the 2008 international financial crisis, the Shanghai Composite Index fell 65.4%, while spot gold rose 5.8 against the trend. %. Securitizing gold and listing it on the stock exchange facilitates the direct trading of gold in the market and improves the efficiency of asset allocation, making it an instrument for institutional investors to allocate gold.

In the end, this is conducive to optimizing the investment portfolio, and the effect of diversifying investment risks is obvious. Gold QDII funds do not closely track spot gold prices. On the one hand, such funds operating in the form of FOFs need to pay management fees for investing in overseas ETFs, and investors must pay management fees again if they hold these gold QDII funds. This has the problem of double fees and reduces profitability. . On the other hand, gold QDII funds hold different positions in overseas gold ETFs, and some can also invest in precious metals other than gold. Therefore, the gold attributes of gold QDII funds are not pure, which will reduce its instrumental characteristics as a purely configuration asset. At present, there are four gold QDII funds in the fund market in China that operate overseas gold ETFs in the form of FOFs. Investors can indirectly access the overseas gold ETF market. The introduction of China's gold ETF will fill the gap that investors directly hold gold ETFs, and promote the construction and improvement of China's fund market. ^[6]

etf domestic approved fund

Major innovations were also seen in products, and gold investment ushered in a new era. Cathay Gold ETF (subscription code: 518803, secondary market transaction code: 518800) began to be issued on June 24, 2013. The issuance of Cathay Gold ETF made direct investment in gold through stock accounts a reality, and also filled a large portion of the ETF market. blank.

Regarding the original intention of the Cathay Gold ETF, Jin Xu, the general manager of Cathay Capital, said that although China's securities market has developed rapidly and has reached the forefront of the world in terms of market capitalization, the types of financial products are relatively scarce, and investors lack diverse investment tools and investments Subject. As soon as the Treasury Bond ETF launched by Cathay Fund came out, it became the largest ETF product in the market, reflecting the market's demand for innovative financial products, especially transactional products.

Jinxu believes that Cathay Gold ETF can provide investors with a powerful tool for asset allocation, resistance to inflation and hedging exchange rate risks. At the same time, the price of gold is less relevant to assets such as stocks and bonds. Gold ETFs are added to the asset portfolio. , Can effectively smooth the portfolio net value fluctuations and reduce risks. "In the international market, the gold ETF is one of the most popular investment types for investors in recent years. The launch of a gold ETF suitable for China's national conditions has great market significance and is positive and far-reaching for fund companies to find their own blue ocean."

Industry insiders analyzed that the gold ETF opened the channel between domestic gold exchanges and stock exchanges, and successfully realized the circulation of capital forces in the two major markets. "From the perspective of the operating mechanism, the gold ETF upholds the advantages of convenient ETF product trading, transparent structure, low cost, and easy investment. For individual or institutional investors, whether as a long-term strategic capital allocation tool or a short-term arbitrage trading product , Are expected to become domestic investors' "gold speculation" benchmark products. "