Deutsche Boerse launches gold ETC in UK

Deutsche Boerse Commodities has unveiled a gold-backed ETC in the UK, with reduced management charges.

The Xetra-Gold product is a security, rather than a fund, in the form of a bearer note that is always 100% backed by the precious metal.

Each unit of the bearer note issued confers investors the right to demand delivery of one gram of gold. The gold reserve for Xetra-Gold is currently around 50 tonnes, worth €1.6bn at current prices.

The firm says Xetra-Gold does not charge any ongoing maintenance fees or front-end load for investments, ensuring that the investor's gold holdings remain secure and stable.

Deutsche Boerse Commodities managing director Steffen Orben says: "If an investor buys 10,000 units of Xetra-Gold, we will still be holding exactly 10 kilograms of gold in custody in 10 years' time too."

Investments are, however, subject to custody fees, which usually amount to 0.36% annually of the value under custody.

Unlike some other gold investment instruments, Xetra-Gold is deliverable even at small quantities. Private investors can have the gold delivered to their bank and receive it there personally. Since the launch of Xetra-Gold in Germany in 2007 more than 400 private investors have elected to use this service.

From its inception nearly three years ago, Xetra-Gold has had the highest order book turnover out of the 178 products in Deutsche Börse's ETC segment. In the first six months of 2010 the gold order book volume on Xetra was around €1.2bn.

This success has prompted the international derivatives exchange Eurex to begin offering futures and options on Xetra-Gold. Since 27 August 2010 investors have also been able to deposit the Xetra-Gold ETC as collateral with Eurex Clearing.