ETFs On Pace To Top $1 Trillion Asset Mark In Early Q1

• DECEMBER 10, 2010, 11:49 AM ET

Report: ETFs On Pace To Top $1 Trillion Asset Mark In Early Q1

By Murray Coleman

Assets in U.S.-based ETFs are rising at a pace that should cross the $1 trillion mark sometime in the first quarter of 2011, says market tracker Strategic Insight.

At the end of November, U.S. ETF assets stood at a record $940.5 billion, estimates analystLoren Fox in a note to clients today.

Driven by strong contributions from investors into stock funds, U.S.-based ETFs had $7.2 billion inflow during November, according to the firm.

Meanwhile, bond ETFs had net outflows.

"Roughly 84% of ETF assets are in equity ETFs, so any improvement in investor confidence that increases demand for equities will propel ETF flows and assets," Fox adds.

While not providing any specific fund breakdown, a report by the National Stock Exchange on Dec. 3 listed Vanguard Emerging Markets ETF(VWO) as particularly popular in November. (The NSX data is by far the most fresh and comprehensive on ETFs so far.)

Also, flows in funds such as iShares Silver(SLV), iShares MSCI Germany (EWG) and theMaterials Select Sector SPDR (XLB) came to light earlier through a report by Birinyi Associates.

Gold falls most since July on commodities rout | Reuters

Gold falls most since July on commodities rout

3:59pm EST

By Frank Tang
NEW YORK (Reuters) - Gold suffered its biggest fall in four months on Friday, tumbling 3 percent as Chinese rate-hike talk, eurozone debt worries and weaker Treasuries prices triggered widespread unwinding of risk in commodities.

After holding firm this week in the face of the dollar's best gains in three months, gold buckled mid-morning as the euro cut gains in tandem with falling U.S. Treasuries prices, when the first day of heavy purchasing by the Federal Reserve failed to jump-start wider demand for debt.

Spot silver tumbled almost 7 percent, its biggest one-day loss since February and second major slide this week, as investors liquidated more positions in heavy trade after the exchange raised margins by 30 percent earlier this week.

In a week marked by disrupted correlations and extreme volatility, dealers said precious metals were caught up in near indiscriminate selling across the commodity spectrum rather than suffering from any bullion-specific bearishness.

Spot gold slid 3.3 percent to $1,362.66 an ounce at 2:09 p.m. EDT (1909 GMT), having earlier hit a one-week low at $1,359.70 an ounce. It was the biggest one-day fall since July 1.

U.S. gold futures for December delivery settled down $37.80 an ounce at $1,365.50.

The Reuters/Jefferies CRB .CRB index dropped almost 4 percent, its biggest daily loss in a year and a half, after a sell-off triggered early by fears of a Chinese interest rate rise snowballed through the rest of the session. Copper and oil fell 3 percent, wheat dropped 5 percent and sugar 12 percent. 


"We have a liquidation pattern across the board in every commodity market here," said Adam Klopfenstein, senior market strategist with MF Global's unit Lind-Waldock.

"Gold and other commodities are going to suffer in the short run as a result of the change in the opinion in the marketplace that China might not be able to grow as fast if it is going ... to rein in ... inflation or to curb fast money that has been spurring the economy," Klopfenstein said.
China stocks fell more than 5 percent on Friday for their biggest percentage loss in over a year, sparking a global commodities sell-off on speculation the central bank will raise interest rates to tackle inflation.
China this week raised bank reserve requirements, boosted yields on new government bills, and introduced new rules to curb money inflows. Those moves came ahead of Thursday data showing Chinese inflation at a 25-month peak, and spurring speculation that an interest rate hike will follow soon.
Other commodities extended losses at midday after the Fed bought $7.23 billion in Treasury paper on Friday under its $600 billion bond-buying program announced last week to stimulate the economy. Treasuries prices hit session lows after the Fed completed its purchases, with both seven-year notes and 10-year notes trading a full point lower in price.

"People are worried now about China tightening. China has been driving a lot of commodities and so fears of further interest rate rises in China ... will have an impact on buying," said David Thurtell, a London-based analyst for Citigroup.

The euro rose from a six-week low against the dollar after European leaders sought to reassure nervous bondholders about the value of their holdings, and as Ireland said it has not formally applied for emergency funding from the European Union.

While the inverse link between gold and the dollar weakened significantly this week as investors focused on European risk, it resurfaced part-way through Friday's trade when the euro pared gains as roiling financial markets outweighed a move by European leaders to reassure nervous bondholders.
(Graphic: r.reuters.com/xuc35q)

G20 DISAPPOINTMENT
Analysts said that gold should be supported by underlying safe-haven buying after the G20 meeting highlighted deep divides on currencies and trade imbalances among member countries.
G20 leaders closed ranks on Friday and agreed to a watered-down commitment to watch out for dangerous imbalances, yet offered investors little proof the world was any safer from economic catastrophe.

Interest in investment vehicles such as exchange-traded funds was soft, with holdings of the world's largest gold-backed ETF, New York's SPDR Gold Trust, falling by just under 1 tonne on Thursday.

Among other precious metals, spot silver dropped 6.5 percent to $25.94 an ounce, while platinum fell 4.5 percent to $1,673.24 an ounce and palladium slipped 5.2 percent to $672.72.

(Additional reporting by Jan Harvey and Marie-Louise Gumuchian in London; Editing by Lisa Shumaker)

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Gold falls most since July on commodities rout | Reuters

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China's gold investment demand grew by 121% in 2Q- Central Banks buy more gold- World Gold Council Report ( WGC)

World Gold Council Report ( WGC)

WGC-  China's gold investment demand grew by 121% in 2Q- Central Banks buy more gold-

CONCLUSION: the WGC just reported its 2Q report ( see attached). Three key things:

 

1- ONE OF THE KEY NEW TRENDS IS CHINA WHERE RETAIL INVESTMENT DEMAND JUMPED BY 121% ( SEE PAGE 11). We continue to believe that deregulation of the gold market in China could OPEN a major new market for gold.

 

2- ANOTHER INTERESTING TREND IS THAT INDUSTRIAL DEMAND FOR GOLD CONTINUED TO IMPROVE BY 14% MAINLY DRIVEN BY ELECTRONICS UP 25% ( see page 10).

 

3- CENTRAL BANKS WERE NET PURCHASERS OF 7 TONNES OF GOLD DESPITE THE IMF SALE OF 47 TONNES DURING THE QUARTER. RUSSIA WAS AMONG THE LARGEST BUYERS ( 34 TONNES). The philippines also bought more gold.

 

Gold Demand Trends for Q2 2010 out (see Enclosed file), and WGC press release below>

  

 

INVESTMENT DEMAND WILL CONTINUE TO SUPPORT ROBUST GOLD MARKET DURING 2010

 

Demand for gold will remain robust during 2010 as a result of accelerating demand from India and China, as well as increasing global investment demand driven by continuing uncertainty over public debt and economic recovery, the World Gold Council ("WGC") said.

According to the WGC's Gold Demand Trends report for Q2 2010, published today, demand for gold for the rest of 2010 will be underpinned by the following market forces:

* India and China will continue to provide the main thrust of overall growth in demand, particularly for gold jewellery, for the remainder of 2010.

* Retail investment will continue to be a substantial source of gold demand in Europe.

* Over the longer-term, demand for gold in China is expected to grow considerably. A report recently published by The People's Bank of China and five other organisations to foster the development of the domestic gold market will add impetus to the growth in gold ownership among Chinese consumers.

* Electronics demand is likely to return to higher historic levels after the sector exhibited further signs of recovery, especially in the US and Japan.

 

Marcus Grubb, Managing Director, Investment at the WGC commented:

"Economic uncertainties and the ongoing search for less volatile and more diversified assets such as gold will underpin investment demand for gold in the immediate future. Further, in light of lingering concerns over public debt levels and the euro, European retail investor demand has increased significantly.

"Over the past quarter, demand for gold jewellery in key Asian markets has been challenged by rising local prices. Nevertheless, we are seeing a deceleration in the pace of decline in demand, providing a strong outlook for ongoing recovery in this crucial market segment."

 

 

GLOBAL DEMAND STATISTICS FOR Q2 2010

* Total gold demand1 in Q2 2010 rose by 36% to 1,050 tonnes, largely reflecting strong gold investment demand compared to the second quarter of 2009. In US$ value terms, demand increased 77% to $40.4 billion.

* Investment demand2 was the strongest performing segment during the second quarter, posting a rise of 118% to 534.4 tonnes compared with 245.4 tonnes in Q2 2009.

* The largest contribution to this rise came from the ETF segment of investment demand, which grew by 414% to 291.3 tonnes, the second highest quarter on * Physical gold bar demand, which largely covers the non-western markets, rose 29% from Q2 2009 to 96.3 tonnes.

 

 

China Officially Enters The Gold Market: Full Release Of PBoC's Plan To Expand And Develop China's Gold Infrastructure

China Officially Enters The Gold Market: Full Release Of PBoC's Plan To Expand And Develop China's Gold Infrastructure
Submitted by Tyler Durden on 08/03/2010 04:24 -0500

The moment many gold bulls have been waiting for - the Chinese Central Bank has just released a directive informing everyone it is commencing the development of a health gold market. In the release (below), the PBoC stressed the need to develop the market to serve the overall situation of China's gold industry, based on improving the competitiveness of China's financial markets, effectively strengthening innovation, and promoting the formation of multi-level market system. The PBoC has asked the Shanghai Gold Exchange, Shanghai Futures Exchange and commercial banks to become actively engaged in developing a national gold market. With China owning a mere $1,064 billion worth of gold (sixth in the world and well behind both France and the GLD ETF in terms of holdings), which represent just 1.6% of its reserve holdings, there is only one way to interpret this borderline revolutionary press release. China has now officially entered the gold market.

Full PBOC release google-translated from Chinese: (MasterBlog: gotta love it that you can now read pretty much anything on the web with Google Translate - even if it's not perfect...)

Improve the market system   To promote the healthy development of the gold market

Recently, the People's Bank, Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Finance, State Administration of Taxation and the Commission jointly issued the "gold on the market for a number of opinions" (silver ?2010? No. 211), clearly the gold market The general idea of future development and major tasks.

Comments stressed the need to fully understand the gold market to promote the importance of healthy development. That featured the gold market is conducive to further improve the financial market system, improve the competitiveness of financial markets; help to promote industrial structure adjustment and upgrade of gold, the pace of industrial development; help broaden the investment channels to meet the residents of investment demand.

Opinions should effectively clear the gold market for development. Stressed the development of the market to serve the overall situation of China's gold industry, based on improving the competitiveness of our financial markets, effectively strengthening innovation, promote the formation of multi-level market system. Asked the Shanghai Gold Exchange, Shanghai Futures Exchange and commercial banks to do good work related to the gold market.

The view that the gold market to focus on strengthening the service system. Actively promote the gold market trading and disaster recovery and other infrastructure, rich market trading, improve the standard of the gold market determined system, improve storage and transportation system, the gold market, gold market to improve and strengthen the clearing services.

Views clearly, the gold market to further improve the system and related policies. Steady progress in the gold market laws and regulations and other related systems. In tax policy, the Shanghai Gold Exchange and Shanghai Futures Exchange, the gold under the existing provisions of the tax policy research to promote sound investment and commercial bank gold gold business tax policy. Expansion of import and export volume of gold qualified commercial banks to further develop the gold leasing market, widening the supply channels for physical gold. Clearly necessary to improve the gold market currency policy to promote the gold market opening, really good job in the gold market financing.

Comments stressed the need to effectively prevent the risk of the gold market.  That relevant departments should earnestly perform their duties, increase communication and coordination, and strengthen supervision of the gold market. Asked commercial banks to increase risk control, and strengthen the relevant system. Required intermediaries to strengthen management of self-discipline, standardize the conduct of its members, to maintain order in the gold market.

Opinions, we must protect the interests of investors. Required to take various forms, enhance investor education and to strengthen the training of employees in the gold market, improve the quality of employees, regulate the behavior of the gold market players.

Read the article here:
http://www.zerohedge.com/article/china-offically-enters-gold-market-full-release-pbocs-plan-expand-and-develop-chinas-gold-in?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+zerohedge/feed+(zero+hedge+-+on+a+long+enough+timeline,+the+survival+rate+for+everyone+drops+to+zero) 

Gold Shines In Any Way, Shape Or Form - Forbes.com

Gold Shines In Any Way, Shape Or Form

Charles Rotblut 03.17.10, 11:20 AM ET

Investors who are interested in allocating a portion of their portfolio to gold have several choices. Direct investments can be made by purchasing physical gold or gold certificates. Exchange-traded funds and futures provide semi-direct exposure. Mining companies provide indirect exposure.

The most direct way to invest in gold is to buy the physical metal itself. Registered dealers sell bullion coins and gold bars. Deciding between the two is dependent on the amount of money being invested. The most common weights for bullion coins are 1/20, 1/10, 1/4, 1/2 and 1 troy ounce. "Good delivery" bars in the U.S. weigh either 100 ounces or 1,000 grams. (However, bars do come in many other weights.) Gold jewelry can also be purchased but its value may differ from the price of gold depending on the design. As a result, bullion coins and bars are better options for investing directly in physical gold.

In Pictures: Seven Ways To Invest In Gold

The inherent problem with physical gold--or any other commodity--is storage. Space must be allocated to house the metal. In addition, and more importantly, the space must be in a secure location to deter theft. Small amounts of gold can be stored in safe deposit boxes. A safe can be used, but it should be immobilized.

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An alternative is to use a custodial service. These are services that hold the metal in their vaults for a fee. Depending on the service, gold coins and bars from several different investors may be stored together ("commingled"). Therefore, it is important to ask about a service's storage policy. If a service does commingle gold, keep a record of any serial numbers.

Another downside to custodial services is the risk of the custodian running out of physical space. This happened last November to small investors who housed their gold at an HSBC vault in New York. According to the Wall Street Journal, increased demand for gold storage from large, institutional clients caused the vault to run out of capacity. As a result, the bank asked smaller clients to move their gold elsewhere.

Gold certificates provide ownership of gold, but do not require physical delivery. Rather, an investor receives a certificate listing the amount of the gold purchased, while a bank or other organization obtains and holds onto the metal on behalf of the certificate owner. Banks in certain countries, such as Germany and Switzerland, sell gold certificates. In the U.S. the Australian-based Perth Mint sells certificates through various third-party dealers.

A minimum investment may be required to purchase a gold certificate, and a commission may be levied on top of the cost of the certificate. The Perth Mint requires a minimum of $10,000 to open an account and a minimum of $5,000 for all subsequent purchases.

Counter-party risk should be considered. This is the possibility that the issuer of the certificate defaults on the contractual terms (i.e. fails to buy the gold, fails to pay the full amount due at the time the certificate is sold, etc.). This risk is particularly heightened when the third party is located in a foreign country. However, it should be noted that the Perth Mint does operate under a guarantee by the government of Western Australia.

SPDR Gold Shares (GLD) and iShares COMEX Gold Trust (IAU) both are trusts that invest directly in gold bullion. Each share of these exchange-traded funds (ETFs) is the equivalent of having an interest in slightly less than 1/10th of an ounce of gold. (The reason why each share does not exactly match 10% of the current price of gold is because of the cash transactions necessary for fund operations. As a result, the trusts hold both gold and cash.)

Exchange-traded funds offer low transaction costs, are easy to trade and do not require the investor to take physical delivery. The downside is that the investor does not own actual gold, but a minority stake in a trust that has gold as its predominant asset. As a result, investors have little control as to if or when the fund chooses to liquidate its holdings. This is potentially problematic because any liquidation would cause tax issues for the shareholders.

Gold futures contracts enable investors to obtain exposure to gold without directly buying the metal or investing in a trust that holds gold. Rather, a futures contract is an agreement to buy or sell the metal at a specified price on a predetermined date. Futures contracts are volatile and can result in a substantial loss of capital.

Gold futures require physical settlement. Physical settlement means that the commodity must be delivered to the purchaser once the contract expires. As a result, an investor who maintains a long position until expiration must be prepared to accept delivery of the precious metal. (Alternatively, an investor holding a short position must be prepared to deliver gold bars.) However, this can be avoided if the position in the futures contract is closed at any point prior to expiration.

Futures contracts in general can use either physical settlement or cash settlement. Physical settlement requires delivery of the underlying asset, most often a commodity such as gold or oil. Cash settlement allows the payment of cash in lieu of the underlying asset. Cash settlement is most often used for financial products such as S&P 500 futures.

Gold mining companies are an option for investors who want exposure to gold, but wish to avoid the storage and potential tax consequences associated with the precious metal. Both profits and stock prices of gold mining companies are influenced by changes in the commodity's price. However, it is important to understand that investing in a gold mining company is not the same as investing in gold.

Many gold companies have exposure to other metals such as copper or nickel. Production costs, labor unrest, political instability and other issues can negatively impact profit margins. The competency of management and the financial strength of the company are also factors. Finally, gold stocks can be influenced by the direction of the stock market. As a result, share prices of gold stocks may not always reflect price changes of the precious metal itself.

As is the case with many other industries, investors can purchase gold mining stocks directly through a broker.

Various mutual funds and exchange-traded funds invest in gold mining companies. The returns realized by these funds will be dependent on the performance of the securities they invest in, rather than being directly tied to the price of gold. It is very important to read the prospectus before investing in a gold mining mutual fund or ETF. Some may invest only in mining companies, whereas others, such as Tocqueville Gold (TGLDX), may also maintain an allocation to gold. (If gold is held, consider the potential tax implications.)

Though the price of gold rose significantly last year, there are no guarantees that the precious metal will continue to appreciate in the future. Like any commodity, gold trades in reaction to actual and forecast demand. Perceived changes in central bank policies, both monetary and those involving the buying or selling of the precious metal, can influence prices. The strength or weakness of the dollar relative to other currencies influences how gold trades. The economy is another factor. If long-term interest rates or inflation differ from expectations, gold prices could potentially be helped or hurt. Geopolitics, though unpredictable, play a role as well.

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The most important factors to consider, however, are wealth, time horizon, portfolio diversification, the type of account the metal will be held in and the willingness to deal with potential storage and tax issues. Gold can play a role in a diversified portfolio, but, like any asset, it may not be suitable for every investor.

Charles Rotblut is editor of the AAII Journal. Click here to visit the Web site of the American Association of Individual Investors.

Gold Shines In Any Way, Shape Or Form - Forbes.com Magazine Article

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