Trading gold efficiently: The most important factors

At first glance, there seems to be a variety of ways to participate in the development of the gold price. However, those who aim to track the gold price as exactly as possible should refrain from gold stocks and gold equity funds: these are not about gold but rather the performance of gold mining companies.

Since it allows for convenient and cost-efficient trading, the so-called paper gold has prevailed: gold certificates, gold ETFs and gold ETCs – exchange-traded commodities. Gold certificates, however, are bearer bonds not covered by physical gold which can be of disadvantage for investors since they have to face total loss of their investments in case of bankruptcy of the issuer. Gold ETFs, on the other hand, are legally considered special funds and thus backed by physical gold, but not admitted to trading in Germany. Even the purchase of gold ETFs on foreign stock exchanges is no longer legal since late July 2013. In Germany, gold ETCs are available for trading – that is to say bearer bonds fully covered by physical gold. Contrary to gold certificates, gold ETCs entitle the owner to the physical delivery of gold. At the same time, gold ETCs can be traded on-exchange as quickly and cost-efficiently as certificates or shares. One of the most actively traded gold ETCs in Germany is Xetra-Gold. One unit of Xetra-Gold entitles the owner to the delivery of exactly one gram of gold. In the first half of 2015, Xetra-Gold worth € 800 million was traded via Frankfurter Wertpapierbörse (FWB®, the Frankfurt Stock Exchange).

Arnulf Hinkel
Financial journalist