DWS is set to offer the cheapest physical gold exchange-traded commodity (ETC) on the market after cutting its fees by one basis point (bps).
In a shareholder announcement, DWS said the Xtrackers IE Physical Gold ETC Securities (XDGU) will see its total expense ratio cut from 0.12% to 0.11% on 1 December.
XDGU now stands out in a fiercely competitive market that sees its four biggest rivals – Amundi, Invesco, BlackRock and WisdomTree – offering gold ETCs at 12bps.
The £2.4bn ETC is still a way off the largest gold product in Europe, the £12.5bn Invesco Physical Gold ETC (SGLD).
Chart 1: Five cheapest gold ETCs in Europe
ETC | TER | AUM |
0.11% | £2.4bn | |
Invesco Physical Gold ETC (SGLD) | 0.12% | £12.5bn |
iShares Physical Gold ETC (SGLN) | 0.12% | £11.6bn |
Amundi Physical Gold ETC (GLDA) | 0.12% | £3.4bn |
0.12% | £461m |
The gold price moved to a seven-month high at $2,044 an ounce on 29 November as investors become increasingly convinced the Federal Reserve has finished raising interest rates.
Traders are now pricing in a 40% chance of a rate cut by March 2024 if inflation continues its downward trajectory.
Declining US 10-year bond yields and a weakening US dollar have also boosted gold prices.
The move by DWS could spark a fresh fee war following a period of relative quiet for ETCs holding the commodity.
SGLD saw its fees halved in the 18 months between February 2020 and November 2021 from 0.24% to 0.12%, as issuers vied for assets flowing into gold at the onset of the COVID-19 pandemic.
Over that period, WisdomTree, BlackRock and DWS all cut fees on their gold ETCs several times while Amundi came to market what was at the time Europe’s cheapest at 0.15%.
In March 2021, DWS cut fees across its currency-hedged physical gold ETCs, also making them the cheapest on the market.
