FAQ ETCs

Xtrackers Exchange Traded Commodities (ETCs) are physically backed securities offering investors exposure to a commodity’s spot price - without the need to trade futures, derivatives, or take physical delivery. Listed on regulated exchanges, ETCs are typically quoted continuously throughout an exchange’s trading hours and can be bought or sold via an intermediary such as a broker.

Most ETCs are suitable for both retail and professional investors seeking exposure to commodity prices, provided they understand and accept the associated risks, which can be found on the website and in the legal offering documents.

Xtrackers offers ETCs that provide exposure to traditional precious metals such as gold, silver and platinum as well as other emerging alternative assets classes.

Xtrackers ETFs are UCITS-regulated investment funds, while Xtrackers ETCs are secured debt instruments linked to commodity prices. Both aim to track underlying assets, but ETFs are structured as funds and ETCs as debt notes.

More information on Xtrackers ETFs can be found here.

The term ‘physical’ in the names of Xtrackers ETCs indicates that these securities are fully backed by the underlying asset, which is owned by the issuer and held securely by a custodian. Each ETC series holds exclusive title to a specifically allocated pool of the respective underlying asset. For operational reasons, Xtrackers ETCs do not provide physical delivery of the underlying asset to investors.

Investing in ETCs involves two main categories of risk: those related to the underlying asset and those inherent to the ETC structure itself. Understanding both is essential before making an investment decision.

ETCs provide exposure to specific commodities or financial instruments without requiring direct ownership. This introduces several market-related risks:

• Market Volatility: Prices can fluctuate significantly due to supply-demand imbalances, geopolitical events, or macroeconomic trends.
• Foreign Exchange Risk: If the ETC is denominated in a currency different from the investor’s home currency exchange rate movements can affect returns.
• Liquidity Risk: Some underlying assets may be thinly traded or become illiquid during periods of market stress, impacting the ETC’s ability to track its benchmark.
• Regulatory Risk: Changes in laws or regulations can materially affect the value of the underlying asset.

Additionally, investors should be cognisant of the risks inherent in an ETC structure. Notably, ETCs do not offer capital guarantees, meaning that investors may lose the entire value of their investment. Furthermore, as ETCs are structured as secured debt securities, investors act as creditors to the issuer rather than holding direct ownership of the underlying asset.
Comprehensive details regarding these risks can be found in the product’s prospectus. Investors should review these documents thoroughly if they have any doubts about the suitability of the product.

The operational and management costs associated with an Xtrackers ETC are incorporated into the investment itself. These expenses are represented by periodic adjustments to the underlying commodity exposure (referred to as the ‘entitlement’). Each ETC’s Factsheet discloses these as the ‘Product Fee’. Additionally, investors may be subject to brokerage or advisory charges.

A gold ETC is designed to give investors exposure to the price of physical gold, without the need to hold or store the metal themselves. This is achieved by pooling physical gold in a secure vault and giving each ETC holder a defined entitlement to a portion of that pool—known as the metal entitlement.

To ensure the gold is safely stored, it is held by a trusted custodian, or metal agent, typically a major bank, in high-security vaults. While investors don’t directly own the gold, their ETC holdings represent a claim on a specific amount of it.

The value of each ETC security is based on the current metal entitlement and the market price of gold. This price is typically determined using a recognised benchmark, such as the London Bullion Market Association (LBMA) gold price, fixed daily at 3pm London time. Multiplying the metal entitlement by this benchmark gives the indicative value of the ETC—an estimate of its worth based on the underlying gold. It is important to note that this indicative value may differ slightly from the ETC’s trading price on the exchange, which is influenced by market supply and demand.

To account for the issuer’s management fee, the metal entitlement is gradually reduced over time. This means that while the gold price may rise or fall, the amount of gold each ETC represents will slowly decline, reflecting the cost of maintaining the product. 
When an investor chooses to redeem their ETC, the issuer arranges for the corresponding amount of gold to be sold, and the proceeds are returned to the investor in cash.

More information about Xtrackers ETCs can be found here: ETC product overview.

Xtrackers ETCs can be bought on exchange or through a broker. Investors need to have a securities account at a bank or with an investment platform, which can buy and sell the notes on the relevant exchange.

Xtrackers Exchange Traded Commodities (ETCs) are physically backed securities offering investors exposure to a commodity’s spot price - without the need to trade futures, derivatives, or take physical delivery. Listed on regulated exchanges, ETCs are typically quoted continuously throughout an exchange’s trading hours and can be bought or sold via an intermediary such as a broker.

Most ETCs are suitable for both retail and professional investors seeking exposure to commodity prices, provided they understand and accept the associated risks, which can be found on the website and in the legal offering documents.

Xtrackers ETCs can be bought on exchange or through a broker. Investors need to have a securities account at a bank or with an investment platform, which can buy and sell the notes on the relevant exchange.