Invesco launches GBP-hedged version of $11.8bn physical gold ETC

Jul 13th, 2020 | By | Category: Commodities

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Invesco has launched a sterling-hedged version of its blockbuster physical gold ETC.

Chris Mellor, Head of EMEA ETF Commodity Product Management at Invesco

Chris Mellor, Head of ETF Equity and Commodity Product Management at Invesco

The Invesco Physical Gold GBP Hedged ETC (SGLS LN) has listed on London Stock Exchange and comes with a fixed fee of 0.19% and a hedging fee of 0.25%.

The ETC tracks the LBMA Gold Price, 3pm fix, in USD, through the purchase of physical allocated gold bars which are stored securely in the London vaults of JP Morgan Chase Bank.

Invesco aims to hold only gold bars that adhere to the LBMA’s guidance on the responsible sourcing of gold.

The new share class seeks to minimize currency risk through daily hedging between the US dollar and pound sterling. The hedging fee and daily mark-to-market of the hedge are settled through physical gold rather than cash in order for the ETC to remain fully invested in gold.

The listing comes at a time when foreign exchange volatility has increased sharply as a result of the economic impact of Covid-19 and the countermeasures taken by central banks which have created new divergences in growth forecasts, interest rates, and currency valuations.

These currency fluctuations can have a material impact on performance with the USD/GBP exchange rate shifting by 12.9% between its highest and lowest points in 2020.

Chris Mellor, Head of ETF Equity and Commodity Product Management at Invesco, commented, “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.”

Gold demand continues to rise

Gold-backed exchange-traded products have witnessed record demand this year as investors seek to buffer their portfolios against potential future market volatility by increasing their holdings of safe-haven assets.

Gold demand has been further spurred by ultra-accommodative monetary policy globally whereby interest rates have been cut to record lows, reducing the relative appeal of income-producing securities such as gilts and Treasuries.

According to data from the World Gold Council, gold-backed ETPs recorded 734 tonnes ($39.5bn) net inflows in the first half of the year, significantly above the highest level of annual inflows, both in tonnage terms (646t in 2009) and US dollar value ($23bn in 2016).

Europe domiciled gold ETPs have attracted $12.5bn (32%) of these global flows, with significant interest in UK-listed products which gathered $7.7bn.

The Invesco Physical Gold ETC (SGLD LN) has pulled in more than $3bn in net new assets during 2020 with Invesco crediting the ETC’s popularity to its robust liquidity, low management fee, and tight bid/ask spreads.

Combined with gold’s YTD performance rally in excess of 17%, the ETC has powered past the $10bn AUM milestone and currently houses around $11.8bn.

 


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