Wednesday, 7th June 2006 (2633 views)

In the face of growing insecurity in equity markets, a new type of investment into gold is expected to prove attractive to pension fund investors.

Exchange-traded funds (ETFs) were developed by the World Gold Council to allow investors to buy into gold without having to take physical ownership of the precious metal.

As the majority of the UK's managed assets are in pension funds, those in the industry expect this to be a major area of new growth in ETF sales.

Simon Village of Exchange Traded Gold, which makes the securities available to investors, is positive about the prospect of pension fund growth.

"Currently a lot of the pensions funds...are looking at the inclusion of commodities and gold in portfolios and when that comes, that will be another massive wave," he told the Reuters news agency.

Mr Village further argued that ETFs are less susceptible to market fluctuations in gold spot prices.

"There's something to suggest that people aren't just taking a trading view and potentially that may explain why we have seen the relative stickiness," he added, referring to the better performance of ETFs than gold itself recently.

The gold spot price is currently in the region of $620, though market experts – including Citigroup – argue that inflationary pressures could see it push $850 an ounce in the long-term.

 

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