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WA gold on exchange

THE PERTH Mint lost the race to be the first in Australia to offer gold tradeable on the Australian Stock Exchange, but the State Government statutory body is still hopeful of keen investor interest for the gold product.

A product disclosure document has been lodged for the Perth Mint Gold Quoted Product (PMG) that is scheduled to begin trading on May 16. Earlier this year a similar product was offered called Gold Bullion Securities that is now trading on the stock exchange.

Like the Gold Bullion product, the ASX price of PMG will track the international over-the-counter market spot price of gold. The gold will be stored at the Perth Mint under WA Government guarantee. At any time investors can take physical delivery of any of the Perth Mint’s bars or coin products or they can nominate cash settlement.

Each unit will be backed by one hundredth of a troy ounce of fine gold and is structured as a call warrant under the ASX’s business rules.

WA Premier Geoff Gallop said the Perth Mint Depository’s precious metal storage facility was already attracting renewed interest from Australian and international investors in response to global economic and financial market uncertainty.

“WA’s triple-A credit rating is an important reason why investors are choosing the Perth Mint Depository as custodian of their precious metal assets, together with the State Government guarantee,” Dr Gallop said.

The Product Disclosure Statement states that the Gold Corporation will charge investors a PMG Management Fee that is fixed till December 31 at a rate of 0.333 per cent annually. This is to cover storage, insurance and other costs.

The current investment climate appears to be in the favour for gold products. According to a survey by research group CPM investors bought 26.9 million ounces of gold bullion during 2002. This was more than double the 10 million ounces purchased on a net basis in 2001 and the most since 1967.

Yet, standing against the product is the uncertain movement in currency rates.

The PMG product is traded on the ASX in Australian dollars while gold generally is traded internationally in US dollars. This means the investment is affected by movements in the exchange rate with the US dollar and the current US gold price.

“Increases in the Australian dollar gold price may arise from increases in the US dollar gold price and/or decreases in the AUD/USD exchange rate,” the PMG product disclosure document warns.

Early this month, Gold Bullion Limited chairman Graham Tuckwell said that sales in the Gold Bullion Securities had exceeded $15 million in the first month of trading with average daily turnover of around $800,000.

Like the Perth product, the Melbourne-based Gold Bullion Securities product offers investors a specific portion of a gold bar and not just a promise by a bank or other party to pay in gold.

However, the physical gold is held in London vaults and insured by the Custodian Bank, HSBC, with all receipts and payments of gold being ‘ring-fenced’ for optimum security.

The listing of Gold Bullion Securities was held up by action from the Australian Securities and Investments Commission.

In February, ASIC placed an interim stop order on the Gold Bullion prospectus due to concerns the prospectus contained potentially misleading or deceptive statements, and omitted material information.

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