Hi! I would like to get long term exposure to gold, but for tax reasons I don't want to buy ETF. I was looking at XAUUSD at Interactive Brokers. Is buying XAUUSD considered as margin/loan? What if I have enough cash in my account and convert it to USD (my account is in EUR), is it still considered as loan? I don't want to pay daily interests, I just want low cost long term position.
I think XAUUSD is an OTC product (CFD) with storage cost of 0.1% per year. With EUR100000 to invest USD100000 in XAUUSD one can with EURUSD spot of 1.14: 1/ Sell EUR87719 and buy USD100000 (select FXCONV and specify either the base currency quantity or the Fx currency quantity). Invest USD100K in XAUUSD. Please note the creation of the USD100K fx risk. Asset: USD100K of XAUUSD, EUR13281 2/ Just invest in XAUUSD. IB will put in place an FX swap (at an additional daily cost). However the Fx risk is only based on the future P&L of the XAUUSD position. Asset: USD100K of XAUUSD, EUR100000 Liability: USD100000
CFD's are always traded as loan/margin with daily financing if held overnight. IB states on their website: "IB Spot Gold and IB Spot Silver can both be traded on margin". I'm assuming if you have cash (USD) in your account and don't need leverage, there shouldn't be any daily costs like with CFD's? I'm talking about plain gold position in USD, without FX hedge to EUR.
An overnight CFD long position means interest charges at a financing rate which is usually far higher than the regular market rate.