Benefit from the rise in gold prices with exchange traded commodities

Benefit from the rise in gold prices with exchange traded commodities

After the price of a troy ounce of gold rose by more than 42 percent to USD 2,063 within the relatively short period of mid-March from USD 1,450 to 6/8/2020, a consolidation began, which brought the gold price to its current level of 1,900 USD fell. Numerous experts are still assuming that the gold price will soon see a further upward movement. For private investors who, after the current breather in the gold price, want to participate in a rise in the price of gold, there are many options for implementing this market assessment.

In addition to the classic tracker certificates, which map the gold price one-to-one, but where the issuer’s credit risk must be accepted, investors can also invest in ETCs with physical gold, such as EUWAX gold. The ETCs on gold that have been on the market for a number of years, which are not secured by physical gold but by a trustee, are also very interesting options for participating in a rise in the price of gold.

Gold – ETCs with and without currency hedging

The ETCs on commodities issued by BNP Paribas are passively managed securities with no maturity limit. In order to neutralize the credit risk of the issuer, BNP secures the ETCs by leaving the assets to an independent German trustee (Clearstream Banking Frankfurt) with a hedging value of 105 percent of the ETC. The ETCs are subject to German law and can be traded every day on the regulated market of the Frankfurt Stock Exchange on Xetra.

With the BNP-Gold Euro Hedge ETC, ISIN: DE000PB6G0E0, the exchange rate is neutralized on a daily basis, which significantly reduces the residual risk of undesirable currency developments. In addition, this type of currency hedging is significantly more cost-effective than is the case with “normal” Quanto products. The total management fee for this ETC is 1.20 percent per year and is therefore only 0.20 percent higher than for the unsecured variant.

For investors who also see the currency risk of the unsecured variant as an opportunity, the BNP-Gold ETC with ISIN: DE000PS7G0L8 could be of interest. The annual management fee for this ETC is 0.99 percent.

CertificateReport Conclusion: The ETCs on the gold price give investors simple and inexpensive access to an investment in gold – and this with neutralized creditworthiness and, if desired, with neutralized currency risk.

This article does not constitute a recommendation to buy or sell gold or investment products on gold. No liability is assumed for the accuracy of the data.


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