It's yellow, but never gets mellow. Good old gold has always been a hot potato for Nepalis, mostly for ornaments and as insurance against that rainy day. But now, there is one more way to go golden - Gold Exchange Traded Fund (GETF).
Ace Development Bank (Ace) from today introduced GETF — an innovative product for the first time in the Nepali financial market. "GETF is paper gold that is easy to trade and incurs no risk in storage," said chief executive officer (CEO) of the bank, Siddhant Raj Pandey.
GETF — expected to address issues of higher prices, purity, costs of insurance, storage and liquidity associated with investing in tangible gold — is a much-awaited development in the domestic financial market.
"A certificate of ownership can be held by gold investors, instead of storing the actual metal," Pandey said adding that GETF allows investors to buy and sell without the inconvenience associated with the transfer of actual tangible gold.Investment in the precious yellow metal is always considered as a cushion against losses in other asset classes. "Investment in GETF will be the perfect hedge against inflation. In the paper gold concept there is no question about purity factor nor do the investors have to worry about storage and hence making the holding a safe bet," he said.
It is widely accepted that the greatest cost in owning gold in a portfolio for long term is not the buying or selling costs but the holding cost.
"On the first day today, Ace sold five kg of gold through ETF certificates," Pramod Pandeya, Ace's compliance department head said.GETF can be traded like shares also. "It will be traded on Ace Trading Floor - the secondary market - from November 9," CEO Pandey said, adding that it was most suitable for those wishing to speculate in the short term. "This is because the price of the ETF is pegged to the international price of gold.
"A customer can buy new ETF in the primary market from Ace everyday during banking hours. However, one can also trade on the Ace trading floor — in the secondary market — from 3:30 pm to 4:30 pm from Sundays to Thursdays.
Why GTEF?
Why Not? Gold is an excellent safeguard against inflation. It protects the portfolio from volatility because factors — both on the macro-economic and micro-economic fronts — that affect returns from most asset classes do not significantly influence the price of gold. Investors, who want to invest in gold, can do so in two ways: Buy tangible gold and/or invest in GETF. However, the success of GTEF in Nepal largely depends upon questions like, "How will investors include gold in their portfolio? What value will it add to their holding and overall investment strategy?" If an investor is clear about the reasons for investing in gold and the issues related to it, there is every reason to include gold as an asset in the portfolio.
So jump on, GETF may be just the ideal vehicle for the gold rush.
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