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Johannesburg - South African gold-backed exchange-traded fund (ETF) provider NewGold is bullish on its gold bullion ETF outlook, despite a recent delisting of just under 3% of its total NewGold debentures.
NewGold announced on Thursday that it has de-listed 2.8 million debentures as a result of the redemption of about 27 502 fine troy ounces of gold bullion.
"The announcement today reflects the redemption of a couple of sales in the past month. However, for two weeks we have experienced more traffic on the buy side than the sell side," Absa Bank head of ETFs and index products Vladimir Nedeljkovic told Miningmx.
He said NewGold is experiencing normal market trading and expects to add to its remaining 92 million NewGold debentures or 920 000 ounces again soon.
David Davis, a gold analyst for Credit Suisse Standard Securities, is bullish on gold ETFs despite the recent drop in sales. "ETFs follow a purchasing pattern. If they follow the same pattern as in the last few years, we will see a slight falling away, then it will trend upwards and sideways until the last third of the year, then sales will go up in the fourth quarter," he said.
Davis predicts 2009 global gold ETF consumption tripling that of 2008. "Already we were sitting at about 455 tonnes of gold ETFs by March, compared to a total 2008 consumption of 312 tonnes," he said.
In February, NewGold moved its gold to Britain after it ran out of domestic storage space because of strong demand for its product in the face of economic turmoil.
NewGold has experienced increased demand for gold ETFs over recent months and is expecting the market to stay strong, even if gold prices drop. "If there is a drop, we expect significant buying," Nedeljkovic said in February at the time of the move.
South Africans are not permitted to hold unwrought gold, meaning they can only purchase gold jewellery or coins. The ETFs give them investment exposure to physical gold without the risk of owning the metal themselves.
NewGold Gold Bullion Debentures are securities backed by physical gold and listed on and traded through the JSE. Each ETF is worth 1/10 of one ounce of gold.
- Miningmx.com
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