China launches two new gold ETFs

By Emerging Money>,

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 Whether you are a gold bug or not it's been tough holding gold in 2013 as gold investors watch the price of gold drop over 20% in 2013.

china-gold Has the appetite for gold dimensioned?

There could be renewed appetite for gold as China launched not one but two gold backed ETFs on the Shanghai exchange as China attempts to open the country's gold market.  Keywords here gold backed another words the ETF buys and sells physical gold similar to the SPDR Gold Shares Trust ( GLD , quote ).

The two funds - HuaAn Gold and Guotai Gold ETFs combined raised 1.6 billion yuan on its initial round of funding suggesting investors around the globe are still looking for gold products.

Although gold's shine has tarnished somewhat in the U.S. China's gold investment demand is on fire and continue to surge from 2006's 15 metric tons investment to 2012's 274 metric tons gold investment.  At this rate China's gold accumulation will crush India's demand for gold in 2013 according to the World Gold Council.  India is currently largest buyer of gold and China is projected take the title by yearend.

Although China is opening its markets for investors to invest in gold through these ETFs keep in mind if you by chance have access to these ETFs emerging markets such as China do not have a mature trading infrastructure for the commodity and pricing power may not be as deep as in mature markets.

Also right now the ETFs are primarily held by institutions and may not trade as liquid as mature markets.

According to the World Gold Council emerging markets make up the bulk of physical gold demand and are showing signs of increasing demand.

Bottom Line: there is only so much physical gold to go around which should cause price to reflect the increase in demand and in turn creating demand to pull more metal out of the ground.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks
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