SEBI allows MFs to float gold exchange traded funds

Securities regulator SEBI has permitted mutual funds to float gold exchange traded funds (GETF), enabling investors to trade in gold the way shares are traded in the stock market.

In a notification, SEBI announced, "the gold held by a gold exchange traded fund scheme shall be valued at the a.m. fixing price of London Bullion Market Association (LBMA) in US dollars per troy ounce for gold having a fineness of 995.0 parts per thousand."

The custodian of Securities Act has also been amended, enabling custodians of the proposed gold funds to outsource safekeeping of bullion to other agencies, but would continue to be responsible to its clients (mutual funds) in the event of any risk.

According to A P Kurien, chairman, Association of Mututal Funds of India, "this would allow common investors to buy and sell gold in small amount at leading boursesthus help diversify investments and risks.

UTI MF's draft offers for a gold exchange traded fund is awaiting SEBI's approval to launch these funds. The GETF will track the price of gold. Its appointed custodians will buy and sell gold bullion as investors look at positions in the ETF.