Does "denominated in dollars" represent a risk (ETF)?

Investing and Markets 📈
1

I’m not clear on the implications of an ETF being denominated in dollars.

If I have a Gold tracking ETF, denominated in dollars, and the dollar value falls off a cliff, then where do I stand?

Perhaps the point is that when I sell the holdings they sell in dollars and get converted to GBP?? - if that’s the situation then I’d be a big loser in this scenario (dollar value falling off a cliff).

thanks,
t.

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Any currency movement will affect your profit / loss. You need to factor in the FX fee of 0.45% when buying / selling too.

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ouch! really? - i had not seen that mentioned in the costs breakdown that accompanied the ETF :frowning:

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Which bit?

The FX fee is something Freetrade charge, if you find a Gold ETF you like that is GBP denominated you won’t have to convert any currency.

If you’re investing for the long haul you’d probably best not to worry to much about currency fluctuations, you can’t do anything about them and right now inflation would affect your buying power more than most currency movements.

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it says fx cost 0.0%, and is the iShares Commodities Commodity Swap (GBP), but the key info doc clearly states “denominated in dollars”

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What is the symbol for this one?

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i don’t see a “symbol” . - it has an isin number of IE00BDFL4P12

iShares Diversified Commodity Swap UCITS
ETF

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Fairly sure this is listed on the app as COMM

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Just fyi, there’s not currency conversion fee when buying ETFs.
I wouldn’t worry too much about denominations if the underlying isn’t the in currency itself.

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what i’m asking though - is - if the dollar crashes - what are the implications to my etf?

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Depends what you mean by ‘crashes’. But I think there’s no definite answer here anyway. A swapper makes it it harder to make a deduction for me personally as well.

Assuming you buy a proper commodities ETF where you own commodities or rights to buy them. Then, the ETF holds ounces/grams/whatever of a commodity, not the dollar value of it. So, technically the denomination shouldn’t matter much, since you’re not holding the denomination itself - a decrease in the dollar vis-a-vis all other currencies should bring the price of the commodity to rise accordingly.
However, most commodities are only traded in dollar. How this together with any exchange rate adjustments that should follow based on arbitrage-impossibility is not clear (to me at least, please correct me if anything here seems wrong).

Long story short, that’s why I wouldn’t worry about denomination - especially since the dollar won’t ‘crash’ crash. A currency needs to crash vis-a-vis other currencies, so why would the dollar do so in an extreme way?

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