OJK Ensures Gold ETFs Are Backed by Physical Gold of Equivalent Value

The Financial Services Authority (OJK) has ensured that every unit of a gold Exchange-Traded Fund (ETF) is backed by physical gold of equivalent value as the underlying asset for the investment product traded on the exchange.

Hasan Fawzi, Chief Executive of Capital Market, Derivative Finance, and Carbon Exchange Supervision at OJK, stated that the equivalence in value will be reconciled to guarantee the existence of the physical gold underlying the issued ETF units.

“So, for every gold ETF unit that reflects a certain value, there is a physical amount of gold of equivalent value whose existence we will ensure,” Hasan said in Jakarta on Monday.

Hasan explained that during every initial issuance or net subscription of a gold ETF, there is simultaneously physical gold backing it, and the record of ownership is reflected through an Electronic Gold Receipt (EGR).

An EGR is an electronic proof of gold ownership backed by physical gold and recorded in the system of the Indonesian Central Securities Depository (KSEI). The physical gold is traded, stored, and administered by gold provider and depository institutions.

Eddy Manindo Harahap, Deputy Commissioner for Licensing and Investment Management Supervision of Capital Markets and Securities Institutions at OJK, said that seven investment managers have applied for gold ETF licences.