Thursday, 26 April 2012

Indian gold ETF sees first conversion of shares into gold

"Last week, we also made a first physical delivery of gold against the ETF. Ashok Dhamnaskar, an investor from Mumbai, has become the first investor to convert gold ETF units to physical gold on Thursday, April 12, 2012.” Nitin Rakesh, CEO of Motilal Oswal Asset Management told Business Standard on April 18.

It is hard to tell if this feature - the ability to convert shares into gold - will become widespread. If it takes off in India it could spur some innovation in developed markets where investors are kept as far away from the physical stuff as possible.

Only one ETF in the UK offers the facility to convert ETF shares into gold (GBS) and only one professional investor (Sebastian Lyon of Troy Asset Management and Personal Assets Trust) has used it - it costs £750 and requires the investor to open a gold bullion account so few bother.

In India it costs a minimum of £9/$14 and the gold can be picked-up by hand. During Tuesday's Akshaya Tritiya gold festival Rajnish Rastogi, senior fund manager & co-head of equities at Motilal Oswal told Financial Express: “We have seen significant interest from investors and have been surprised with the volume of trade in our ETF.”

This seemed to be confirmed by the figures discussed in the previous blog which showed the Motilal Oswal ETF (MGOLD) trading proportionally higher than other Indian physical gold ETFs - although most of the others were much bigger to start with.

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