It was the launch of exchange traded funds that gave the gold price a huge hike in the last decade. Now China is poised to launch its first gold ETFs bringing this easy way to own gold to its population of 1.3 billion.
Huaan Fund Management and Guotai Asset Management are reported to have completed their plans for ETF products that will trade on the Shanghai Stock Exchange.
The China Securities Regulatory Commission has met with representatives of the bourse and the two fund management companies to discuss the launch. China is already set to overtake India as the largest consumer of gold this year.
Why is China keen to promote ownership of precious metals? Basically this is to diversify away from dollar-linked assets like its own currency in a time of financial turmoil and money printing.
Gold is a safe haven asset and a parachute from the Chinese bubble economy as real estate prices are collapsing in the major cities. Earlier this year a trader in the Sharjah Gold Souk told ArabianMoney that gold prices were going up because the Chinese are moving out of the dollar and into gold.
The ETFs are a hugely important step down that road. This could double or triple Chinese gold buying. ETFs avoid the storage problems of physical gold and provide easy liquidity for investors.
George Soros and John Paulson, the legendary hedge fund managers, both invest in gold through ETFs for this reason, despite the small costs involved. Chinese buyers will also know a good deal when they see it!
How long before these Chinese gold ETFs are the largest in the world? The next issue of ArabianMoney investment newsletter will investigate the best way for readers to profit from precious metals this autumn (click here).