Gold: Investment with scarcity value

1 Source: www.gold.org 2 Source: www.gold.org 3 Source: www.containersucher.com

Did you know that ...

.. a euro coin made of pure gold would be worth about

970 euros

... 1 gram of gold can be drawn into a thread

2.4 kilometers

long? [1]

... a total of only

53,000 metric tons

of gold worldwide can be mined profitably? [2]

8% of annual gold demand

comes from industry, e.g. for the production of microchips? [3]

... for every person in the world there are about

25 grams of gold

on average? [4]

Benefits of an investment in gold

Since the minting of the first gold coins more than 2,500 years ago[5], gold has been prized as an easily tradable object of value. Gold is comparatively rare, cannot be reproduced artificially, and is extremely durable yet easy to process. In addition, it has high aesthetic value. These aspects continue through to the present day, making gold one of the most sought-after assets in the world.

Protection
The gold price usually rises more rapidly in the short term when uncertainty in the markets is high. In the long term, however, steadily increasing income levels around the world are the primary driver of the gold price as private demand represents the largest share of total demand for gold[6]. This can also make gold interesting for investors in terms of potential returns. Overall, however, gold remains a speculative investment that can be very volatile at times.

Diversification
The gold price generally displays a low correlation with asset classes such as equities or bonds. Especially in periods of elevated market uncertainty, gold usually benefits from its status as a relatively safe investment haven, while equity prices, in particular, can come under pressure. Adding gold to a portfolio can therefore help with risk management.

Potential inflation hedge
In times of low interest rates and rising inflation rates, gold can provide investors with a hedge against potential losses from inflation. This is because the potential real returns on other asset classes that are considered safer, such as U.S. government bonds, fall and the demand for gold can rise – along with its price. On the other hand, if interest rates increase faster than the inflation rate, gold can lose its appeal among investors.

Liquidity
Gold is a heavily traded asset globally. It is widely traded among private individuals as it is with central banks and other institutional investors, such as pension funds or sovereign wealth funds. It is also very easy to buy and sell the precious metal today through exchanges, via gold ETCs (exchange-traded commodities), for example. These are exchange-traded securities backed by physical gold. However, ETCs will not make an investor the owner of the relevant metal. The many market participants can also help to facilitate simple, fast and cheap trading.

Invest in gold – without a vault or safe deposit box

Investors looking to invest in gold can choose from a range of options. The most direct way is to purchase gold bars or coins, but this involves high transaction and storage costs. For more indirect exposure to gold, investors can invest in the equities of relevant mine operators, for example. Gold ETCs seek to track the gold price. With Xtrackers gold ETCs, investors can potentially benefit from a number of key advantages here:

Transparency

Aims to track the price of gold and offers currency hedged options – saves investors the costs of securities management.

Liquidity

High trading volumes on many European exchanges – relatively easy to buy and sell.

Sustainability

Xtrackers ETC plc seeks to adhere to sustainable sourcing guidelines.

Currency hedging

Also available in euro-hedged and sterling-hedged versions – with an aim to reduce currency risks. [7]

Backed by physical gold

ETCs hold physical gold as security.


Xtrackers Gold ETCs: An overview

Xtrackers offers three Gold ETCs: an ETC denominated in US dollars, and currency-hedged ETCs in Euros and Sterling. All ETCs are backed by allocated physical gold. However, investing in ETCs will not make an investor the owner of the relevant metal. Each ETC series has exclusive title over an allocated pool of gold, stored in secure accounts. For Xtrackers ETC plc, the allocated gold also aims to adhere to the London Bullion Market Association’s Responsible Sourcing Guidelines.

Just like with all other investments, gold ETC investments are also associated with certain risks, including market, currency, inflation and liquidity risks. For more information, please refer to the Key Risk Factors’ section.

 

Name ISIN FX Hedged Total Expense Ratio (TER) p.a.
Xtrackers IE Physical Gold ETC Securities DE000A2T0VU5 no 0.15%
Xtrackers IE Physical Gold EUR Hedged ETC Securities DE000A2T5DZ1 yes, Euro 0.33%
Xtrackers IE Physical Gold GBP Hedged ETC Securities DE000A2UDH48 yes, GBP 0.33%
Xtrackers Physical Gold ETC GB00B5840F36 no 0.25%
Xtrackers Physical Gold ETC (EUR) DE000A1E0HR8 no 0.25%
Xtrackers Physical Gold EUR Hedged ETC DE000A1EK0G3 yes, Euro 0.59%
Xtrackers Physical Gold GBP Hedged ETC GB00B68FL050 yes, GBP 0.69%

Risks

Investors should be aware that Xtrackers ETCs represent collateralised securities with limited right of recourse. Their repayment depends on the underlying commodities in the case of physical Xtrackers ETCs, and on the deposited securities in the case of index-based Xtrackers ETCs. Such securities normally involve physical gold, but this can be replaced by approved financial instruments under certain circumstances.

Key Risk Factors

  • An investment in an Xtrackers ETC may not be suitable for all investors. Xtrackers ETCs are not principal or capital protected investments, therefore investors should be prepared and able to sustain losses up to the total loss of the capital invested.
  • Prices of precious metals are generally more volatile than prices of other asset classes. Substantial fluctuations of the value of the investment are possible even over short periods of time.
  • Investments in ETC securities will not accrue any interest and performance is subject to the deduction of the product fee.
  • Investing in ETC securities will not make an investor the owner of the relevant metal.
  • Pricing of the ETC securities on the secondary market may be at a significant discount or premium compared to the Value per ETC Security (intrinsic value) published by the Issuer. Investments in Xtrackers ETCs involve numerous risks including but not limited to, general market risks relating to the relevant commodities, exchange rate risks, interest rate risks, inflationary risks, liquidity risks, and legal and regulatory risks.
  • Movements in exchange rates can impact the value of your investment. If the currency of your country of residence is different from the currency in which the underlying investments of the fund are made, the value of your investment may increase or decrease subject to movements in exchange rates.
  • Currency hedging component of ETC securities: In case the issuer has made a profit on a currency hedging component between relevant observation dates, the issuer and the investors will have an unsecured credit exposure to the Series Counterparty for such a profit being settled for up to two business days following each valuation day.
  • In exceptional circumstances, gold collateral may be substituted for financial securities collateral by giving 60 days’ notice to securityholders.
  • Xtrackers ETCs are exposed to swap counterparty risk. In the event of counterparty default e.g. as a result of insolvency, the Xtrackers ETC will be redeemed at the relevant value per security which may be less than the value of investors’ original investment. In addition, investors may lose more than any decline in the underlying index should the value of the collateral decline following a counterparty default. Therefore, investors should understand and evaluate the credit risk of Deutsche Bank AG as swap counterparty prior to making any investment.
  • The value of an investment in Xtrackers ETC securities may go down as well as up. Past performance is not a reliable indicator of future performance.
  • For a full description of risk factors, please refer to the relevant prospectus.

1. www.spektrum.de

2. www.usgs.gov

3. www.statista.com

4. DWS, January 6, 2021

5. www.montereycompany.com

6. gold.org

7. Currency risks are possible losses or profits of an investor who converts money from one currency into another, invests in foreign currencies or trades internationally. For more information please see the Key Risk Factors section.

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