Wanna <b>invest in gold</b>: Look into RMB's liquid gold on the JSE | UJUH | How to invest in gold |
| Wanna <b>invest in gold</b>: Look into RMB's liquid gold on the JSE | UJUH Posted: 19 Aug 2014 11:02 AM PDT  The JSE has somehow gone back to its golden roots, thanks to the innovation of Rand Merchant Bank which has brought to the market a R2 billion Krugerrand-denominated bond. Rand Merchant Bank, a division of FirtRand Bank, listed last week the FirstRand Gold Bond which it says gives investors direct exposure to gold and is the first of its kind to be listed worldwide. The statement announcing the listing on the JSE said the Gold Bond has a term of five years. "It requires investors to buy Krugerrands, which they then lend to FirstRand when purchasing the bond. At its expiry the value of the bond is determined by the current gold price, the Dollar/Rand exchange rate and the interest earned. This interest is calculated in terms of ounces of gold as represented by Krugerrands. Investors may take physical delivery of the Krugerrands on maturity or opt to get settled in cash." RMB Debt Capital Markets co-head Dale Wood added that "The notes provide direct exposure to the rand gold price and a positive yield in the form of interest ounces payable on maturity." It is Donna Oosthuyse, Director: Capital Markets at the JSE, who bring to the fore the going back to roots angle. "The JSE was founded in 1887 as a result of the first South African gold rush. This issuance provides investors with a way to gain exposure to one of the oldest assets on our exchange in a new and innovative way," said Oosthuise. The statement added that investors may not hold gold in unwrought form according to South African law; however they still need to pay for the administrative costs associated with holding and storing gold when they invest in products which track the price of gold. These costs are eliminated by the Gold Bond because investors earn a yield on the bond instead of paying fees. Investors can also opt to take physical delivery of the underlying gold because it is in the form of Krugerrands which are legal tender in South Africa. "Investors also benefit as they are able to buy and sell the Gold Bonds on the JSE, with RMB acting as a market facilitator to ensure liquidity and price transparency of the notes," said Wood. The statement added that investors can also get a Gold Bond note with a single Kruger rand, which means that retail investors can use it to gain exposure to the gold price. Investors who already own Krugerrands can use the Gold Bond to achieve the same exposure to the gold price they would have enjoyed when physically holding Krugerrand coins, while also earning interest on the bond. Wood added that the Gold Bond offers both inflation and rand/dollar exchange rate protection while avoiding the significant storage and administration costs associated with other direct gold investment options available. "Current market conditions are particularly attractive for gold investment because of rand/dollar weakness and expectations of higher inflation," said Wood.  |
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