Does trading currency choice in a Gold ETC make a difference when base currency remains same?

Question

The WisdomTree Physical Swiss Gold Exchange Traded Commodity is available in trading currencies of both GBP (SGBX.L) and USD (SGBS.L) on the London Stock Exchange. I believe that the base currency for both funds remains USD (as that is what the spot price of gold is measured in).

Is there a particular reason why one would wish to buy GBP/SGBX over USD/SGBS? I am having difficulty in understanding why if the base currency remains USD in both circumstances, what difference the trading currency would make (after all if the trading currency is GBP at some point there would need to be a conversion to USD so that the spot price can be determined)?

If I'm showing a huge lack of understanding here, please feel free to explain it to me like I'm five.

Interestingly the above link does not show live prices for GBP/SGBX, just USD/SGBS; not sure if this is a website bug, or has a deeper meaning.

For background I am a UK investor, so my account is denominated in GBP.

Answer 1

It's dead simple, since you are starting with pounds, just get the pound one.

At the end, you can just take pounds out.

If you went with the USD one, you'd have to "change twice".

Thus, they're simply offering the pound one as a "convenience to you" - so to speak.

(Note that inside their enterprise, they essentially "change on every transaction" in some sense, but since they do so much all at once it is frictionless.)

I'd guess the reason they added a "GBP one" is just because they have many customers there and also they're on that exchange.

(For example, say they suddenly had a pile of Canadian customers, they'd probably offer a CAN denominated one.)

(Or, for example, if you live in Hong Kong the physical-gold accounts (every bank account has one) are certainly denominated in HKD. And you can be sure that in Switzerland there are innumerable CHF denominated gold stores.)

One point, you know how you mention "the gold spot price is in dollars". I mean, you can certainly get a quote on gold (in small or enormous quantities) in all major currencies. I bet you that internally, they often "buy physical gold" using their piles of pounds as well as their dumpsters of dollars. (But none of that matters to you, it's all nominal.)

So your Question Title,

Does trading currency choice in a Gold ETC make a difference when base currency remains same?

1. It makes a "difference" because - extremely simply - you'll save a few quid by not having to do a exchange at each end.

2. Your idea that the "base currency is the same" is not totally accurate, you're a bit off track there. (A) As I mention, I bet you a ounce they absolutely buy gold with their pounds; and (B) you say "the gold spot price is dollars" - that's not really the full picture of the situation. Bazillions in bullion is traded in all major currencies all the time; as we speak.

Good luck!

Answer 2

The SGBS (USD denominated) product is there to appeal to large institutional investors who keep large amounts on USD at hand and wish to trade gold. (Private, retail investors with USD in their account may also choose SGBS).

The SGBX (GBP denominated) product is there to appeal to mainly private, retail investors in the UK who wish to trade gold but do not wish to incur the extra expense of exchanging their GBP into USD. With SGBX the exchange rate is built into the price.

The same sort of set-up will exist in other USD denominated exchange traded products - e.g., the S&P500.