Gold has been the most sought-after asset in Europe over the first six months of the year, with physical gold exchange-traded products gathering US$12.5 billion of net inflows, eclipsing the amount invested in any previous full year[1]. Record demand for what is often perceived as a “safe haven” asset is being driven by several factors but particularly the uncertainty over the pandemic’s impact on the global economy.
The ability of central banks to support their domestic economies through the crisis has resulted in differences in growth forecasts, interest rates and currency valuations. For example, the USD/GBP exchange rate in 2020 has ranged from a high of over 1.32 at the start of the year to a low of just under 1.15[2].
Currency fluctuations can have a material impact on investors. Quoted in US Dollars, the gold price has risen by 16.7% over the first six months of the year but is up by 23.7% over the same period when converted to Sterling.
Chris Mellor, Head of ETF Equity and Commodity Product Management at Invesco, said: “Many investors this year have told us they want exposure to the gold price but not the currency risk attached to a US dollar asset. We are now able to offer these investors currency-hedged versions of the Invesco Physical Gold ETC, our largest exchange-traded product in Europe.”
|
Product |
Invesco Physical Gold GBP Hedged ETC |
|
Exchange |
London Stock Exchange |
|
Reference index |
LBMA Gold Price PM |
|
Bloomberg code |
SGLS LN |
|
Base / trading currency |
USD / GBP |
|
Fixed fee (p.a.) |
0.19% |
|
Hedging cost (p.a.) |
0.25% |
The Invesco Physical Gold GBP Hedged ETC is designed to provide the performance of the gold price, less the annual fee and hedging costs. It will aim to minimise currency risk through a daily hedging mechanism. The hedging fee and daily mark-to-market of the hedge will be settled through physical gold rather than cash, so that the ETC remains fully invested in gold for the benefit of investors.
Investments in the ETC are used to purchase physical gold bars, which are held in an allocated account and stored securely in the London vaults of J.P. Morgan Chase Bank. The ETC uses a “swing bar” method where it holds gold bars of at least the full value of the assets invested. Invesco aims to hold only gold bars that adhere to the LBMA’s guidance on the responsible sourcing of gold, which came into effect in 2012.
[1] Source: World Gold Council, to 30 June 2020.
[1] Source: Bloomberg, for the period 1 January to 30 June 2020.
Key investment risks
Value fluctuation – The value of investments, and any income from them, will fluctuate. This may partly be the result of changes in exchange rates. Investors may not get back the full amount invested.
Limited recourse – If the issuer cannot pay the specified return, the precious metal will be used to repay investors. Investors will have no claim on the other assets of the Issuer.
Currency hedging – Currency hedging may not completely eliminate the currency risk and may affect the performance.
Commodities - Instruments providing exposure to commodities are generally considered to be high risk which means there is a greater risk of large fluctuations in the value of the instrument.
Important information
This press release is intended for trade press use only. Please do not redistribute. All data is coming from Invesco as at 7 July 2020 unless otherwise stated. This document is by way of information only. Views and opinions are based on current market conditions and are subject to change.
The prospectus documentation describing the products, risks and related costs of Invesco products as well as information on their portfolio composition are available for residents of countries where such products are authorised for sale at www.etf.invesco.com. It is recommended that potential investors study the prospectus before investing.
The products described on www.etf.invesco.com are not suitable for everyone. Investors’ capital is at risk and they may get back less than they invested. Investors should not deal in these products unless they understand their nature and the extent of their exposure to risk. The value of these products can go down as well as up and can be subject to volatility due to factors such as price changes in the underlying instrument and interest rates.
Issued by Invesco Asset Management Limited, Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire, RG9 1HH, authorised and regulated by the Financial Conduct Authority.
