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| 30 January 2012 | ||
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Gold the diversifier, up 9% year-to-date in 2012 |
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Fix Price and Net Asset Value The London Gold Market Fix price is used to calculate the Net Asset Value (NAV) of the SPDR® GOLD SHARES Trust which is accessible to investors through an Exchange Traded Fund (ETF) listed for trading on the SGX, referred to as GLD SP. As of the Asia trading session on 27 January, the price of gold, as gauged by the London Gold Market Fix price had firmed 9% in the 2012 year to date. In pricing terms, the PM Fix price on 26 January 2012 was US$1,727, up from the 30 December 2011 AM Fix price at US$1574.50. For background, the London Gold Market Fixing Ltd fixing price is printed twice a day, at 10.30am and 3.00pm London local time. State Street Global Markets, LLC explain on the SPDR Gold shares website that the fix price is based upon the “actual buy and sell orders for gold in the global OTC market." Moreover, according to the SPDR Gold shares website "a good analogy for the London fix versus OTC trading would be to consider the London fixes similar to opening/closing prices for stocks and to consider the spot price for gold as the continuous market price throughout the trading day.” More information can be found in the FAQ section of the SPDR Gold Shares website. While continuous spot prices can provide indicative measures, the NAV of SPDR Gold Shares Trust is formally determined by valuing the total ounces of Gold owned by the Trust at the Gold London PM fix price, including cash held by the Trust, net of the accrued expenses involved with the 0.40% expense ratio. The NAV is determined each day that the NYSE Arca platform is open for trading. This total NAV of the trust can be divided by the number of shares outstanding to apportion the NAV of each share of the SPDR Gold Shares Trust.
Asset class, Correlation and Volatility In its recent gold investment statistics commentary released by the World Gold Council (WGC) entitled “Price, Volatility and Correlation performance during 2011”, the WGC summarises gold’s price performance in various currencies, its volatility and correlation to other assets from the perspective of global financial markets, describing the macroeconomic factors that influenced gold’s behavior in the past year. Based on WGC’s comparison across different asset classes, gold was one of the few asset classes to deliver positive returns. In the year of 2011, the US dollar price of gold rose by 8.9%, based on the London PM fix, “marking the 11th consecutive year of price increases”. The report stated that “gold’s consistent performance as a diversifier and vehicle to manage risk effectively, along with its more traditional role in capital preservation, are key to its importance in asset allocation as a foundation to a portfolio.” As an asset class, the World Gold Council recently maintained that during August and October 2011 "while gold prices were not immune to the effects of financial market swings, its volatility was considerably more stable than experienced by equities" . The report also noted that "gold's long term low correlations to most assets underpin its effectiveness as a portfolio diversifier".
GLD SP The total turnover in the SPDR® GOLD SHARES (GLD SP) jumped to more than US$2.4bn in 2011. This active turnover placed GLD SP at the top of the 2011 turnover rankings for all 90 Exchange Traded Funds (ETFs) listed on the SGX. Lower minimum notional value relative to other Gold market mediums make GLD SP accessible to most investors. The minimum investment, on a price of US$167.0 is 10 units or 1 ounce of Gold at US$1,670, not including transaction fees. Unlike the requisite for investing in gold bars and coins, the Product Highlight Sheet states that GLD SP offers investors the opportunity to invest in the gold market through an investment in securities whilst the logistics of storing and insuring the gold are dealt with by the custodian (HSBC Bank USA) with the related expenses built into the price of the shares. Further information can be found at www.spdrgoldshares.com.
More on the structure and risks associated with trading SGX ETFs can be found here. SGX also offers two stocks involved in gold mining. With market capitalization of S$647million, LionGold Corp Ltd. is a mineral exploration and production company. The Company has acquired a new concession, the Kashmir Project (Dunkwa Area) in Ghana where it intends to explore for gold. Another stock, which had its IPO in October last year, is CNMC Goldmine Holdings Ltd. The Company conducts exploring activities and processes mined ore into gold and operates in the Sokor Gold Zone in Malaysia. It had a market capitalization of S$202 millionas of 26 January 2012 . In 2011, of LionGold Corp Ltd. gained 19.2% in 2011 and that of CNMC Goldmine rose 20% since its IPO. On a year to date basis, LionGold Corp Ltd. and CNMC Goldmine rose 1.7% and 4.2% respectively.
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Specified Investment Products As part of the Monetary Authority of Singapore’s (MAS) initiative to introduce stronger measures and enhance requirements to further safeguard the interests of individual investors, Exchange Traded Funds have been categorised as Specified Investment Products (SIPs). SGX SIPs have structures, features and risks that may be more complex in nature. The MAS now requires broking firms to ascertain whether an individual investor has the relevant knowledge and experience to understand the risks and features of SIPs before allowing the individual to open an account to trade SIPs listed on both securities and derivatives markets. SGX has introduced two online initiatives, a Customer Account Review Module and an Online Education programme, to support individual investors in their understanding and trading of SIPs listed on SGX. Click here to access these initiatives.
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Market Updates – Daily Market Focus and Product Guide Never miss another update! Click |
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