Thursday, October 7, 2010

Goldman (NYSE:GS) Issues Gold-Linked Structured Notes

Goldman Sachs (NYSE:GS) issued $66.5 million in structured notes linked to gold, as prices continue to break all-time records and solid support continuing for the precious metal.

There is no interest on the notes, as investors receive profits at maturity, with a price cap of 17 percent. The securities, which were sold on October 1, are for one year. JPMorgan Chase (NYSE:JPM) is the distributor for Goldman.

Investors in the notes have their principal protected at maturity unless prices drop by over 20 percent below the entry level price of $1,316.25 on any given day.

The notes aren't backed by gold bullion as ETFs are, but by the credit of Goldman.

The securites issued by Goldman are basically bonds bundled with derivatives. Investors reportedly have been buying them as a brisk pace.

Bloomberg data show structured note linked to gold have grown to $109.8 million in September, over three times the $35.6 million issued in August.

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