Gold Trust ETF to be Listed on the Mexican Bolsa

State Street Global Advisors [SSgA] took its $8.1 billion streetTRACKS Gold Trust (GLD) ETF south of the border on Thursday, August 10, as it listed the popular gold bullion ETF on the Bolsa Mexicana de Valores.

"The continued demand for gold bullion in an uncertain investment environment and the widespread acceptance of GLD as its de facto proxy has prompted its further expansion into worldwide markets," said Stuart Thomas, managing director of World Gold Trust Services LLC, who partnered with SSgA to launch the fund in the U.S. "With gold experiencing solid performance, we see an increase in investor appetite in countries such as Mexico and throughout the world."

The fund will likely be a hit with Mexican investors: Mexico’s budding ETF marketplace already hosts a crude oil ETF, and investors in Mexico have historically sought out hard assets as a hedge against currency fluctuations.

Gold bullion ETFs have become a truly global phenomenon, with ETFs now listed in Australia, France, Mexico, South Africa, Switzerland, the U.K. and the United States (two ETFs: (GLD) and (IAU). It seems like it will only be a matter of time before the funds enter other markets; for one, Canada seems like an obvious choice.

The gold ETFs have spearheaded a wave of interest in hard metal funds; a silver bullion ETF is already trading in the U.S. (SLV), and funds tracking the price of copper and “metals baskets” are in the works as well. (The latter funds may use futures contracts rather than holdings of the physical metal to gain exposure, as the costs of storing and transporting large values of relatively inexpensive metals like copper would lead to high expenses.)

The fact that the funds have caught on globally is no surprise, but some observers are surprised that they have been so successful in the United States. U.S. tax law places a significant disadvantage on gold bullion holdings, as it taxes them as “collectibles” rather than “investments.” That discrepancy means that gains on gold bullion are taxed at 28 percent rates, rather than at the long-term capital gains rate of 15 percent.

There is a move afoot in Congress to apply long-term capital gains rates to gold bullion investments, but most observers doubt the effort will succeed. Gold bullion enjoys much more favorable tax treatment in most overseas markets.

GLD 1-yr chart:

Comments

[REBEL:]

Investors; August 14, 2006
Mexican entrance as a buyer of Gold ETFs is a bullish sign for gold especially as Mexico is one of the biggest producers of precious metals. May be the rest of the world will wake up and realize that the paper monies are as worthless as they really are and price gold where it should be.

2006 Aug 14 09:56 PM