Friday, May 17, 2013

Gold ETN - etfSA

Gold ETN - etfSAGold ETN Investec Gold ETN Product Name Investec Gold ETN Exchange Traded Note Underlying Physical Spot Gold Price (London) Issuer Investec Bank Limited Maturity Date October 2017 Exchange Johannesburg Stock Exchange Ratio 0.1 (1/10th of an ounce) • Gain exposure to the US Dollar Gold Price • No Rand Dollar exchange rate conversion • Daily trading on the JSE • Daily liquidity provided by Investec Bank What is the Investec Gold ETN? The Investec Gold ETN Exchange Traded Note “ETN” (“Investec Gold ETN”) is a fi nancial instrument listed on the JSE Limited (“JSE”) that is designed to provide the investor with a simple and transparent way in which to gain exposure to the US Dollar price of gold. Investec

Gold ETN differs from other listed gold notes in that there is no exposure to the Dollar/Rand exchange rate. This is referred to as the Quanto feature. The Quanto feature results in a percentage move in the underlying gold price being refl ected in a similar percentage move in the Investec Gold ETN. Investors are now able to invest in the price movements of gold without the effect of also having to predict what the Dollar/Rand exchange rate will be. Why invest in Investec Gold ETN? The price of gold is fi xed twice daily in USD on the London Bullion Market and is the basis for all sales and purchases of gold. By listing a Quanto Gold ETN like the Investec Gold ETN investors can now for the fi rst time take advantage of the moves in this USD Gold price without having to hedge out the effects of the Rand. Traditionally the Rand and Gold price have had a negative correlation in that as the price of gold rises the price of the Rand has tended to strengthen against the dollar wiping out some of the profi t that investors would have gained from a straight USD gold investment. The graph below shows the negative correlation that has existed between the Rand and the Gold price over the last 3 years, where it averaged -41% for the period. Gold vs Rand correlation - 3 year Source Bloomberg *Correlation based on 30 day rolling returns How is Investec Gold ETN priced? The Investec Gold ETN is listed for a period of 5 years and can be actively traded on the JSE, with Investec Bank Limited (“IBL”) providing liquidity as a market-maker. The Investec Gold ETN price will closely correlate to the underlying price of Gold which is published daily in US dollars, however the Investec Gold ETN will not be sensitive to currency movements as the Quanto feature provides a built in currency protection. How does the Quanto Adjustment work? When investing in an underlying that quotes in a foreign currency, the investment is normally sensitive to currency movements. The Quanto feature provides the investor with “built-in “currency protection. Investec hedges against this risk and a Quanto adjustment is made daily to the Investec Gold ETN price. The Quanto adjustment may be positive or negative dependant on a number of factors including interest rates, volatility and correlation. For more...

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