Fund managers want retail investors to embrace gold-backed exchange-traded funds as yellow metal hits 7-year high

State Street will reduce the lot size of SPDR Gold Shares in Hong Kong from April 24 to ease access the fund

Gold has risen 13 per cent this year, beating US Treasuries while global stocks crashed amid recession threats

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Gold has rallied to the highest level since December 2012 as the coronavirus pandemic stokes worries about a global recession, pushing gold-backed exchange-traded funds to new highs. Photo: AP

Published: 8:00pm, 14 Apr 2020Updated: 8:46pm, 14 Apr 2020

Fund managers are seeking to drum up interest for gold as an asset class among retail investors, as the yellow metal burnishes its reputation as a safe haven amid the coronavirus pandemic.

State Street Global Advisors will halve the lot size for its Hong Kong-listed SPDR Gold Shares, the world’s largest gold-backed exchange-traded fund (ETF), to five shares per lot from April 24. Value Partners has pledged to keep the total expense ratio at 0.4 per cent per annum for its ValueGold ETF.

The decision reflects the metal’s resurgence this month with prices reaching the highest level in more than seven years amid fears of global recession. Bullion has rallied 13 per cent this year while US Treasuries returned 8.1 per cent and global stocks crashed 17 per cent.

“With the reduction to five shares per lot, it is equivalent to buying about half an ounce of gold from previously one ounce,” said Robin Tsui, Asia Pacific strategist for SPDR ETF at SSGA. “This is an amount that is still not available to retail investors if they buy gold from, say, a jewellery store.”

The reduced lot size means retail investors could buy the ETF from less than HK$6,000 from HK$11,800 at the end of March. The ETF has returned 9.1 per cent this year through April 9, while the Hang Seng Index lost almost 15 per cent amid the pandemic-driven sell-off.

Global gold ETFs added 298 tonnes of holding last quarter to 3,185 tonnes, the most since 2016, according to the World Gold Council. The bulk of the inflows went into North America and Europe funds.

Asia saw an inflow of 4.9 tonnes last quarter, of which half of it went to the Shenzhen-listed Bosera Gold ETF. The fund this week rose to an all-time high, handing investors a 10 per cent gain this year.