More simulated gold products on the way

S&P Launches Gold-Hedged Index To Protect Against Dollar Risk

By Joan E. Solsman
Dow Jones Newswires
via The Wall Street Journal
Thursday, December 3, 2009

http://online.wsj.com/article/BT-CO-20091203-708321.html

Standard & Poor's launched a new index designed to allow investors to participate in equity-market gains while hedging with gold to reduce risks from U.S. dollar fluctuations. UBS AG will create and launch products based on the new index.

Gold has been rallying hard for more than a month --hitting a string of record highs -- as investors have bought it and other commodities, equities, and higher-yielding currencies as they diversify out of U.S. dollar holdings. The dollar recently hit a 16-month low versus the euro.

According to S&P, the S&P 500 Gold Hedged Index is designed to simulate the returns of an investor who is long the total return of the S&P 500 stock market index and long gold futures contracts. It should let investors participate in equity market returns while hedging against a decline in the value of the U.S. dollar compared with gold. The hedge protects only against adverse movements in the relative value of the U.S. dollar; stock market risk is not hedged in any way.

"By holding long gold futures contracts, investors stand to gain when the U.S. dollar loses value as expressed in the dollar price of gold," S&P director Liz Taxin said.

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