I am confused about the Hedged versus UnHedge ETC like you mentioned. So I asked AI:
Scenario : Trump Crashing the USD (USD depreciation/devaluation)
Your Expectation: You believe Donald Trump's policies will lead to a significant depreciation of the US dollar (EUR/USD exchange rate goes up significantly).
- Unhedged Gold ETC: If you held an unhedged gold ETC priced in USD, a crashing dollar (meaning the euro is getting much stronger) would make the USD-denominated gold much cheaper in euro terms. This strong positive currency movement would significantly enhance your returns (or significantly offset losses) from the underlying gold price.
- Hedged Gold ETC (EUR-Hedged): The hedging mechanism would neutralize this substantial positive impact from the weakening dollar. The ETC's returns would largely reflect the gold price in euros, without capturing the significant gain from the favorable currency exchange.
Therefore, if you strongly expect the US dollar to crash (depreciate significantly), an *unhedged ETC* is likely to be more rewarding. You would benefit from both the potential safe-haven demand for gold (potentially increasing its USD price) and the significant positive impact of the weaker dollar when converting those USD gains back into euros.
So it does says the Contrary.
Scenario : Trump Crashing the USD (USD depreciation/devaluation)
Your Expectation: You believe Donald Trump's policies will lead to a significant depreciation of the US dollar (EUR/USD exchange rate goes up significantly).
- Unhedged Gold ETC: If you held an unhedged gold ETC priced in USD, a crashing dollar (meaning the euro is getting much stronger) would make the USD-denominated gold much cheaper in euro terms. This strong positive currency movement would significantly enhance your returns (or significantly offset losses) from the underlying gold price.
- Hedged Gold ETC (EUR-Hedged): The hedging mechanism would neutralize this substantial positive impact from the weakening dollar. The ETC's returns would largely reflect the gold price in euros, without capturing the significant gain from the favorable currency exchange.
Therefore, if you strongly expect the US dollar to crash (depreciate significantly), an *unhedged ETC* is likely to be more rewarding. You would benefit from both the potential safe-haven demand for gold (potentially increasing its USD price) and the significant positive impact of the weaker dollar when converting those USD gains back into euros.
So it does says the Contrary.
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5Mo
@GenoGenova AIs are not always the smartest. Ask yours to check its answer. Here is the answer to your question from Deepseek:
In the event of a USD crash, a **EUR-hedged gold ETC** would behave differently compared to an **unhedged gold ETC**, depending on the exchange rate movements between USD and EUR. Here is a detailed analysis:
### 1. **Unhedged Gold ETC (USD-based)**
- The price of gold is usually quoted in USD.
- In the event of a USD crash (sharp depreciation of the dollar), the price of gold in USD tends to rise, as gold acts as a safe haven currency.
- **But:** As the ETC is priced in EUR, a USD weakness leads to a **negative currency effect** for European investors.
- If the USD falls against the EUR, the gain from the rise in gold is partially or fully offset by the currency loss.
- **Performance:**
- Gold price in USD **rises** (positive).
- USD/EUR exchange rate **declines** (negative for EUR investors).
- Net effect depends on how much the USD falls and how much gold rises.
### 2. **EUR-hedged gold ETC**
- Here the currency risk (USD/EUR) is hedged.
- The ETC only tracks the pure gold price performance, without exchange rate effects.
- In the event of a USD crash:
- The gold price in USD rises (as with the unhedged ETC).
- However, the hedge compensates for the currency loss, so that the performance **depends only on the change in the gold price**.
- **Performance:**
- Gold price in USD **rises** (positive).
- Currency effect is neutralized (no loss due to USD depreciation).
- The ETC benefits **fully** from the rise in gold, without exchange rate losses.
### **Summary: Performance comparison in the event of a USD crash**
| Scenario | Unhedged Gold ETC (EUR) | EUR-hedged Gold ETC |
|-------------------------|---------------------------|------------------------|
| **Gold ↑ in USD** | Positive | Positive |
| **USD ↓ vs. EUR** | Negative (reduces profit) | Neutral (hedged) |
| **Overall performance** | Lower (as currency loss) | Higher (pure gold performance) |
### **Conclusion:**
- A **EUR-hedged gold ETC** would perform **better** in the event of a USD crash because it avoids the currency loss.
- An **unhedged gold ETC** could perform worse despite rising gold prices in USD if the USD falls sharply against the EUR.
For investors who want a pure gold price exposure without currency risk, the **hedged ETC is the better choice**. On the other hand, those who deliberately speculate on USD strength might prefer the unhedged ETC.
In the event of a USD crash, a **EUR-hedged gold ETC** would behave differently compared to an **unhedged gold ETC**, depending on the exchange rate movements between USD and EUR. Here is a detailed analysis:
### 1. **Unhedged Gold ETC (USD-based)**
- The price of gold is usually quoted in USD.
- In the event of a USD crash (sharp depreciation of the dollar), the price of gold in USD tends to rise, as gold acts as a safe haven currency.
- **But:** As the ETC is priced in EUR, a USD weakness leads to a **negative currency effect** for European investors.
- If the USD falls against the EUR, the gain from the rise in gold is partially or fully offset by the currency loss.
- **Performance:**
- Gold price in USD **rises** (positive).
- USD/EUR exchange rate **declines** (negative for EUR investors).
- Net effect depends on how much the USD falls and how much gold rises.
### 2. **EUR-hedged gold ETC**
- Here the currency risk (USD/EUR) is hedged.
- The ETC only tracks the pure gold price performance, without exchange rate effects.
- In the event of a USD crash:
- The gold price in USD rises (as with the unhedged ETC).
- However, the hedge compensates for the currency loss, so that the performance **depends only on the change in the gold price**.
- **Performance:**
- Gold price in USD **rises** (positive).
- Currency effect is neutralized (no loss due to USD depreciation).
- The ETC benefits **fully** from the rise in gold, without exchange rate losses.
### **Summary: Performance comparison in the event of a USD crash**
| Scenario | Unhedged Gold ETC (EUR) | EUR-hedged Gold ETC |
|-------------------------|---------------------------|------------------------|
| **Gold ↑ in USD** | Positive | Positive |
| **USD ↓ vs. EUR** | Negative (reduces profit) | Neutral (hedged) |
| **Overall performance** | Lower (as currency loss) | Higher (pure gold performance) |
### **Conclusion:**
- A **EUR-hedged gold ETC** would perform **better** in the event of a USD crash because it avoids the currency loss.
- An **unhedged gold ETC** could perform worse despite rising gold prices in USD if the USD falls sharply against the EUR.
For investors who want a pure gold price exposure without currency risk, the **hedged ETC is the better choice**. On the other hand, those who deliberately speculate on USD strength might prefer the unhedged ETC.
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•@Epi thank you very much for your answer.
So I got the same answer now from an European investor.
However my nuance was this : Starting to invest not Holding during the USD depreciation (Trump ERA), but then expecting a USD recovery in Future (Post Trump ERA).
You Expect USD To…
📉 Keep falling | EUR-Hedged | Avoid currency losses
📈 Recover after falling | Unhedged | Capture currency rebound as extra gain.
QUESTION : If I buy gold ETCs during USD weakness and expect the USD to recover, is unhedged still better?
✅ Yes — buy Unhedged ETCs in that case, because the USD recovery will boost your returns in EUR, even if gold stays flat.
I Hope you understand my Confusion :)
I am still undecided for long term what to choose.
- One as higher TER the Hedged ETC
- The other one has lower cost but Double EXPOSURE - Gold Price and USD price.
So I got the same answer now from an European investor.
However my nuance was this : Starting to invest not Holding during the USD depreciation (Trump ERA), but then expecting a USD recovery in Future (Post Trump ERA).
You Expect USD To…
📉 Keep falling | EUR-Hedged | Avoid currency losses
📈 Recover after falling | Unhedged | Capture currency rebound as extra gain.
QUESTION : If I buy gold ETCs during USD weakness and expect the USD to recover, is unhedged still better?
✅ Yes — buy Unhedged ETCs in that case, because the USD recovery will boost your returns in EUR, even if gold stays flat.
I Hope you understand my Confusion :)
I am still undecided for long term what to choose.
- One as higher TER the Hedged ETC
- The other one has lower cost but Double EXPOSURE - Gold Price and USD price.
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•@Epi oh I see I understand the term "B&H investors" now
yes in this perspective go EDGED :) makes sense.
yes in this perspective go EDGED :) makes sense.
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5Mo
@GenoGenova I would not necessarily recommend gold as a pure B&H asset. As shown, gold moves in cycles. You can hold it in the USD devaluation years (9) and then simply sell it again and switch to equities (7 years). Why forego returns with B&H?
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