The Ghana Stock Exchange (GSE) is to begin trading of the Newgold Exchange Trading Fund (ETF) next month.

Trading in the Fund, which was initially scheduled for this month, has had to be postponed to allow testing of applications that will ensure smooth take-off and efficient operation of the Fund.

“The gold Fund is expected to trade on the GSE by next month, though the initial plan was to start in December. The change in date has become necessary to enable us look at various applications. We are currently looking at various applications that will ensure a smooth take-off,” Mr. Kofi Yamoah, Managing Director, GSE, told the B&FT in an interview.

The ETF will give investors the chance to trade indirectly in gold and create excitement in the securities market. It will be traded as an ETF that operates as a listed stock and a collective investment scheme on the exchange.

The Fund will be locked into gold – thereby allowing investors to have exposure to gold without directly allowing them to buy the assets. It will continuously track gold prices and allow investors to invest indirectly in gold bullion through the purchase of units in the ETF.

The Director General of the Securities and Exchange Commission, Mr. Adu Anane Antwi, said each of the Newgold ETF securities is equivalent to 1/100 units of real gold in a secured stockpile of gold bullion.

Trading of the gold fund on the GSE is to improve the depth and width of the capital market, provide more investment variety for the Ghanaian investor, and also provide liquidity to the market as ETF has a guaranteed market-making mechanism.

Mr. Antwi said that “It will lead to a reduction in the overall risk of portfolios in the market, since investment in commodities tends to exhibit low correlation with traditional stock and bond investment.

“It will also introduce the concept of market-making onto the Ghanaian capital market, since liquidity providers will be appointed to buy and sell ETF units when the secondary market does not provide both sides of orders at their quoted prices.”