Invest in Gold ETFs and Gold ETCs – Here’s how!


Gold as a stability anchor

Many investors see gold as a secure building block for your investment. The reason: Gold can be a stable anchor in the securities portfolio in times of financial crisis or hyperinflation, because the price of gold tends to be opposite to the stock market.

Gold in the form of bars and coins has a tangible value, which is why the yellow precious metal will probably never lose its entire value – in contrast to the example of cash or interest.Gold has proven in the past that it can be a safe haven for investors in times of crisis: in the financial crisis of 2008 and the following years, the price per ounce of gold climbed from $ 640 to nearly $ 1,100 (January 2007 to January 2010) – an increase in value of over 70 percent.

However, to participate in the price of gold, as an investor you do not necessarily have to buy physical gold, so you do not have to buy nuggets, bars or coins. With gold ETFs and gold ETCs, you can invest in gold in a particularly comfortable way.

How do gold ETFs work?

ETFs (Exchange Traded Funds) are exchange-traded investment funds that are tradable on the stock exchanges like stocks and other securities. Index funds, as ETFs are called, reflect the evolution of an index.

Gold ETFs are therefore tracking the development of the gold price. To physically collateralise the ETF, the issuer of the gold ETF buys gold bullion with the fund’s assets. The bars are held by a bank (Custodian) and usually weigh nearly 400 troy ounces, so they weigh around 12.4 kilograms. The bars stored with the depositary are assigned to the ETF, are clearly identifiable and can be viewed by the public in the form of a precise list.

Buying and selling are much easier on gold ETFs than on physical gold. The issuer of the ETF usually buys large bars and therefore gets close to the spot price (gold market price, which can be seen on the internet in gold charts “live”). ETFs are special funds, so the gold holdings are legally protected if the issuer of the gold ETF becomes insolvent. The world’s largest gold fund is the US SPDR Gold Shares.

How do gold ETCs work?

ETCs, ie exchange-traded commodities, can be traded on the stock exchange in the same way as ETFs. Investors can invest in the yellow precious metal just as easily with gold ETCs as with gold ETFs. Gold ETCs are also tracking the gold price trend almost 1: 1. The performance of an ETC is based on the spot price (price for immediate delivery) or the futures price (price for delivery in the future) of a commodity or a whole commodity basket.

Like gold ETFs, gold ETCs are often fully backed with gold. However, the issuer of the gold ETC can cover your capital not only with physical gold, but also in part with delivery claims on gold (book gold). This means that you are entitled to the supply of gold by purchasing a Gold ETC.

There is another big difference between gold ETFs and gold ETCs: Legally, ETCs are perpetual bonds. If the issuer of the ETCs becomes insolvent, ETCs are subject to insolvency proceedings. Your right to receive gold will help you a little. Your investment is part of the estate and you can run out of money.