A question on Gold 🛎

EDIT: Also wandering whether buying and holding the Gold commodity in the CFD account is a good idea or not

I’m not being lazy, I’m definitely googling the answer, but if anyone already understands gold well, maybe they can condense the answer better, and at least we can have a discussion here :slight_smile:

-A family member is seriously considering allocating part of their money into gold; not for trading or necessarily to make money, but rather safekeeping. They are a bit scared of a looming economic crash and have a growing distrust towards banks in general, the possibility of big inflation, or the collapse of the Euro (their money is in euros).
From an Invest account, which of the instruments would be best suited for this? I see Wisdomtree, Invesco, iShares all have ETCs and there’s a Xetra ETF. Are these derivatives or do you actually own gold when you buy the ETC. How does it work?
I think the actual commodity is only available on the CFD account.

Thanks and I realise Im really ignorant on the subject :smiley:

I think it’s a derivative.

The idea is that the instrument’s price moves at the same time as the price of the underlying commodity (by the same amount in the same direction). Someone more knowledgeable than me can help better, though.

And there’s nothing wrong with asking for help if you’re stuck. That’s what this is for. If anyone regards it as beneath them, they don’t have to answer. :slight_smile:

Good luck!

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I see now they are “Physically Backed”
Do you know if it makes any difference whether it’s an ETC or an ETF?

Also a bit confused about the iShares Physical Gold - it is available in in £ and $ but they have different movements.

If they both track the same thing, what’s with the difference?

The only difference there would be the currency fluctuations

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You gotta take physically backed with a pinch of salt. There is not enough gold to back all the ETFs, it’s probably partially backed but that’s about it.

An ETF focussed on gold is “paper gold” at the end of the day, if you want to have total safety you need to buy proper physical bullion.

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They say picture is worth 1000 words, in this case maybe few million…

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I get that, but they aren’t thinking of investing, but rather a “safe” option. They have their money in a Euro savings account and in case the Euro devalues, or whatever, they would like to have an alternative way to hold their money safely. Bonds in times of depression? Not very fond of the idea. Doesn’t gold go up in value during recessions anyway?

@Nirnaeth thanks I’ll look into that. I gather that’s not something you can simply do through here

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It really depends on goal and risk tolerance. No asset is risk free.

I don’t see Euro to devalue in short term nor long term. Cash is the safest assest class during any recession. If you check collapse of 2008, gold also sank at first. So if history is teacher, there is no asset class that is without risk.

Personally I have my " emergency " fund in cash. We seen oh so many of this 99% secure “cash” equivalent etf or commodity etf sank as well…

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Apologies, wasn’t fully aware of the context.

Gold definitely is a “safe haven” instrument and it has seen an enormous rally over the last year. If you think there was a rally in the stock market (I think it’s a bear trap personally), then look at treasuries, gold and the US dollar.

My portfolios is 40% treasuries, 12% gold (and gold miners) and 12% USD. Treasuries perform really well in times of recession, but you have to take the currency into account - I requested USD based treasuries for 212c am waiting for them. USD is the worlds reserve currency, so it’s in enormous demand now and all other currencies are feeling the pressure - the USD is bullish.

For gold, the closest you get is physical gold which you could order from other sites, but there is demand so expect long waiting times and you have to factor delivery costs into the equation. The closets after that is gold ETFs, but like I said, they’re only partially backed by physical gold - if at all. They still do well. Then you have gold miners and producers. However, whilst gold acts as a currency (compared to silver, which acts more like a commodity), gold ETFs act like an index tracker, and miners act like stocks - so the degree of volatility increases as you go along.

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The IShares S&P Gold Producers ETF is one of the highest rated in 2020.

Ticker: IS0E

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Thank you all for your answers!

There are some advantages regarding tax for German residents for Xetra Gold ETF I suppose