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Markets & Stocks

Cashing in on the gold rush
Exchange Traded Funds are coming to the NYSE and AMEX that will be linked to the precious metal.
November 12, 2004: 11:32 AM EST
By Andrew Stein, CNN/Money staff writer

NEW YORK (CNN/Money) - As gold prices hover near 16-year highs, it's been difficult for the average investor to get pure exposure to the precious metal, but that will change next week.

An Exchange Traded Fund (ETF) that prices next week will offer investors a chance to trade securities directly linked to gold prices, according to a prospectus released by UBS and appearing on the Web site

The streetTRACKS Gold Trust will trade on the NYSE under the ticker GLD, according to the prospectus.

In addition, Barclays Global Investors is developing another gold ETF that is being reviewed by the SEC and will eventually trade on the American Stock Exchange (AMEX), according to spokesmen for Barclays and the Amex.

Gold prices rose $1.55 an ounce in early trading Friday to $436.50, not far from Wednesday's 16-year peak of $437.25.

"[A gold ETF] has been one of the more frequent request we get," said Cliff Weber, senior vice president of ETFs at the AMEX. "We expect strong demand."

It's a challenge for individual investors to get pure exposure to gold because trading in the commodities market is difficult--buying the actual bullion and then insuring it can be cumbersome.

Many investors look to mining companies for gold exposure, but the companies often hedge their positions to protect from a drop in gold prices.

Companies can also carry specific risks, such as doing business in dangerous areas of the world, that can offset gains in gold prices, according to Victor Flores, equity analyst with HSBC Securities.

"In some informal polling that we've done, investors like the leveraged gains [mining] companies give them, but don't like the individual risks of the companies," he said.

A strong driver of gold prices recently has been the falling dollar. Investors often look to stash money in the precious metal because a falling dollar can lessen capital gains from investments.

And as long as the greenback's downward trend continues, HSBC's Flores sees further gains for gold.

"No question the dollar is driving what happens to gold prices," he said. "Right now, the dollar is driving the bus."  Top of page

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