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Capital Markets

UK investors can go for gold

While bankers are going through hoops to sell structured financial products to retail investors, UK private investors can now buy one of the oldest and simplest commodities in the world – gold.

On December 9, Gold Bullion Securities launched its gold-backed securities (GBS), listed and traded on the London Stock Exchange.

Gold Bullion Securities is two-thirds owned by the World Gold Council, a trade association through which the world's leading gold producers promote investment in the yellow metal.

A gold-backed security is essentially a receipt giving individuals an entitlement to physical gold. Primary market makers – approved banks or brokers – apply to buy gold-backed notes from Gold Bullion Securities. These notes represent gold that the applicant has bought in the market and deposited on trust with HSBC, which is one of the London Bullion Market Association's clearing banks. Each note represents one-tenth of an ounce of gold bullion. The applicant can sell notes to private investors, who can then trade them in the secondary market.

"The note has nominal value, and is really just a method of buying and selling the trust interest," says Chris Hogan, a partner at Baker & McKenzie, Gold Bullion Securities' legal adviser.