As gold remains one of the favoured safe haven asset classes, paper or gold ETFs having taken in $12.5 billion in the first six months, Invesco has launched a sterling hedged version of its physical gold exchange-traded commodity (ETC).

In US dollar terms, gold is up by 16.7 percent year-to-date but in Sterling terms it has risen by 23.7 percent in the same period.

Invesco said the ability of central banks to support their domestic economies through the crisis has resulted in differences in growth forecasts, interest rates and currency valuations. For example, the USD/GBP exchange rate in 2020 has ranged from a high of over 1.32 at the start of the year to a low of just under 1.15.

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

The Invesco Physical Gold GBP Hedged ETC is designed to provide the performance of the gold price, less the annual fee and hedging costs. It will aim to minimise currency risk through a daily hedging mechanism. The hedging fee and daily mark-to-market of the hedge will be settled through physical gold rather than cash, so that the ETC remains fully invested in gold for the benefit of investors.

Investments in the ETC are used to purchase physical gold bars, which are held in an allocated account and stored securely in the London vaults of J.P. Morgan Chase Bank. The ETC uses a “swing bar” method where it holds gold bars of at least the full value of the assets invested. Invesco aims to hold only gold bars that adhere to the LBMA’s guidance on the responsible sourcing of gold, which came into effect in 2012.