ETC essentials · 2 minute read
Physically backed ETCs: do I own the metal?
The short answer
A physically backed ETC gives you exposure to metal held within the product’s structure. You own a security with rights defined in its legal documents. That is different from owning a gold bar in your own name.
Why it matters
“Physically backed” describes how the product is supported. It does not mean your investment is guaranteed or that you can automatically collect the metal.
Important features include:
- Backing: which metal supports the securities?
- Allocation: are specific bars identified and set aside?
- Custody: which institution safeguards the metal?
- Investor rights: what claim do security holders have?
- Redemption: can ordinary investors request metal, and on what terms?
Allocated metal means identifiable bars are assigned to a particular account. It does not mean each investor personally owns a particular bar.
Delivery rights vary. Check the product’s rules rather than assuming “physical” means delivery is available through your broker.
A simple example
You invest €1,000 in a physically backed gold ETC through a broker.
Your account shows ETC securities. The product’s structure holds the supporting gold. You do not receive a bar or a personal vault account.
Your investment can still fall if gold prices decline.
What to check
- Is the backing physical metal or financial contracts?
- Is the metal allocated?
- Who is the custodian?
- What rights do investors have over the backing assets?
- Are physical-delivery options available to you?
- How do fees affect the metal backing each security?
Key term explained
Metal entitlement is the amount of metal represented by each ETC security under the product’s rules. Fees can reduce this amount over time.
Physical backing is a feature to understand, not a guarantee against loss.
Sources
Product structures and investor rights vary.