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New Fund For Indian Investors Can Benefit U.S. Investors

Aug 17, 2007
When investors invest in these Exchange Traded Funds, the fund managers purchase the physical commodity. When it comes to Gold prices, U.S. Investors should keep a close eye on what Indian Investors are doing. Many people are now investing in gold using Exchange Traded Funds as the investment vehicle. On the U.S. Market the two main Gold ETF funds are GLD and GDX. modity. So the more investors purchase the more physical gold is held and that means there is less of the physical commodity in circulation.

The gold funds in the U.S. Market have been extremely successful. The amount of gold held by U.S. Investors in these funds is over 600 tonnes. Now the popularity of these ETF funds is spreading. Until recently investors of gold in India would invest primarily in gold jewelry. There were no Exchange Traded Funds available for Indian investors to put their money in, in fact until recently it was not legal.

So now is where it gets interesting. The securities and Exchange Board of India (SEBI), is in the final stages of clearing the way for Indian citizens to invest in gold Exchange Traded Funds on the Indian Exchange. India is the largest market in the world for gold investments. Two funds in India, Benchmark Mutual Fund and UTI Mutual Fund have already submitted proposals for gold funds in the market. Other fund houses such as DSP Merrill Lynch are interested in introducing these types of funds.

Exchange Traded Funds are a new concept to Indian investors, but buying and selling gold is not. Even small investors in India are very familiar with this concept. It is popular for investors to buy a certain amount of gold for long term investment. This concept of holding gold is catching on more in the United States but it is very common in India. So now Indian investors will be able t hold their gold through Exchange Traded Funds. Like in the U.S. When shares are bought they are backed with the physical commodity. India is a large market for gold.

So if Indian investors start pouring their money into Gold related funds, more physical product will be held off the open market making gold even a scarcer commodity. These developments alone are enough to put upward pressure on the price of gold.

Now lets add in the current drop in the dollar and now there is more focus on gold. Investors turn to gold when the value of the dollar drops. Conditions are in place to keep upward pressure on the price of gold.
About the Author
Andrew Goldman is president of Metal Rabbit media services, the operator of Get ETF Info He has written a number of articles on finance and environment over the last ten years.
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