Securities and Exchange Commission (SEC) is preparing enabling legislation for investors to trade in gold through the Colombo Stock Exchange (CSE), through an operation known as exchange traded funds (ETF).
This would require the services of a mutual fund (asset management company), a trustee bank and auditors.
Due to the appreciating price of gold, it’s considered a good hedge against inflation and a better investment tool than foreign currencies such as US dollars.
“Gold as opposed to jewellery is something that people don’t keep in their homes,” SEC Director General Malik Cader told The Sunday Leader.
There is however no physical movement of gold in this type of trading.
“Trading can be done in units, say, even in grams,” added CSE’s Assistant General Manager (AGM) Clearing & Settlement Rajeeva Bandaranayake.
This operation/trading is similar to the trading of unit trusts, with the underlying factor/security in ETF’ being the physical gold.
If an investor wants to buy the gold, he would have to buy in bulk, probably in one kilo slabs, he said.
India introduced gold trading into their stock exchange a few years ago and this venture has proved to be successful, even with retailers participating, Amit Tandon, AGM Securities and Exchange Board, India, addressing a seminar in Colombo on Thursday (November 11) said.
Tandon said that virtually any commodity could be traded through ETF, especially metals.
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