Speculating in gold just got more attractive (to some at least) « Mining Blog

Speculating in gold just got more attractive (to some at least)

11. October 2011,

Swiss “structured-products” exchange, Scoach, says it’s now the world’s first exchange to allow trading in gold-denominated structured products; it might also see exchange traded funds (ETFs) using gold as a trading currency.

Scoach, a joint venture between Switzerland’s SIX Group and Deutsche Boerse, had teamed up with EFG Financial Products (the structured products arm of Switzerland’s EFG private bank) to launch the new structured products.

At first sight this might seem to be only a minor innovation. And, these days, anything owning to the description “structued product” smacks of those innumerable confections, offered to customers in the months and years leading up, and undoubtedly contributing, to the financial “crash” of 2008.

However, this particular product could prove more seductive to investors than some others. As the International Business Times (quoting Scoach) puts it:

“Structured products priced in gold could previously only be traded over the counter,making them generally less liquid and prices less visible than for products traded on an exchange.” [IBT 10 October 2011].

“As of today, issuers can list structured products in gold and trade them in XAU [the international currency code for trading inl gold]. There were already structured products denominated in XAU, but previously you couldn’t trade them on an exchange.”

Added Christian Reuss, CEO of Scoach Switzerland:”In times of world uncertainty in relation to currencies, gold is a valid alternative. So it is only consistent to offer gold as a trading currency as well.”

So how would it all work? To invest in the XAU-denominated structured products, investors will either need to have a precious metal or gold account, or they can buy the “product” using Swiss francs which their bank will then convert into XAU.

Says Scoach: “When they sell their products the currency will be XAU. Whether they can cash this in for physical gold will depend from bank to bank”.

The firm also regards XAU-denominated ETFs as an attractive possibility to add to the “multi-currency ETFs” already listed on the Swiss stock exchange, and which allow investors to trade in euros, dollars, yen, francs and other currencies.

“If market participants want to list ETFs denominated in XAU, we could do that,” says Scoach.

One wonders what Chinese speculators and banks, as the biggest hoarders and accumulators of gold, might think about this scheme..?

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