China Approves Fund That Will Invest In Foreign Gold ETFs, Opening Avenue For Millions Of Mainland Investors

Tyler Durden's picture

And here is the catalyst: China has approved a fund that will invest in gold exchange-traded funds outside the country, opening the door to mainland China investors who face negative real interest rates on their bank deposits and want to hedge against inflation. Beijing-based Lion Fund Management Co. said they received approval from the China Securities Regulatory Commission on Monday to proceed with the fund. Next stop: gold much higher as the bubble mania is really unleased in such ETFs as GLD, UGL and PHYS.

More from Dow Jones:

Beijing-based Lion Fund Management Co. said they received approval from the China Securities Regulatory Commission on Monday to proceed with the fund.

"Over the longer term it should be another factor to add to gold's support," said Carlos Sanchez, associate director of research with CPM Group in New York.

The move is a step in the development of the financial market in China, the world's second largest gold consumer behind India, and the No. 1 producer of the metal. It comes on the heels of an August move to increase the number of commercial banks allowed to import and export gold, broadening the domestic market beyond the five largest commercial banks.

Chinese gold imports have been climbing as the nation's central bank started to build gold reserves in recent years and domestic interest in gold investment grew. China's gold lobby has long pressured the government to raise its gold holdings.

A first of its kind for mainland China, the fund brings Chinese buying power to an increasingly popular way for participants to invest in gold.

Then again, China may not need to come to the US for this. They may just stay with their own completely fraudulent exchanges, where ETFs will be backed not even by paper gold, but literally by paper:

"I wouldn't be surprised to see China come up with an ETF themselves for gold," Sanchez said.

The investor-led gold buying--which has also sent futures to a record $1,424.30 earlier this month and boosted shares of gold miners--comes as participants are betting gold will hold its value more strongly than other holdings like the U.S. dollar or dollar- based investments.

And so talk of a gold bubble may finally resume. Of course, it will first require that gold complete a NFLX-like move of about 1,000% higher before anyone take such talk seriously (or else NFLX itself may be, gasp, a bubble).

h/t London Dude Trader