What is the difference between an ETC and a commodity ETF?

ETCs (Exchange Traded Commodities) and certain ETFs (Exchange Traded Funds) allow investors to gain exposure to commodities such as gold or silver without opening positions on derivatives like CFDs or futures.

The main difference between ETCs and commodity ETFs lies in their structure and how they provide commodity exposure.

How do commodity ETFs work?

Commodity ETFs are investment funds whose value is linked to commodities, either directly or indirectly. These ETFs may include:

• shares of companies linked to the commodity, such as mining or energy companies
• futures contracts, which reflect expected price movements of the commodity
• physical holdings of the commodity, where permitted by regulation

Typically, commodity ETFs offer broader or thematic exposure, rather than tracking the price of a single commodity.

How do ETCs work?

ETCs are exchange-traded debt securities structured to track the price of underlying commodities.

ETCs may provide exposure through:

• physical backing: The commodities themselves (for example gold or silver) are bought and held, supporting the price of the ETC.
• price tracking without physical backing: If the ETC issuer does not hold the physical commodity, it typically supports the ETC with cash or high-quality securities issued by financially strong institutions.

ETCs are designed to track the price of a specific commodity or a small group of commodities. Due to different tracking methods, their price performance may differ from that of similar commodity ETFs over time.

How ETCs and commodity ETFs are treated on etoro

Although ETCs and ETFs are different assets types, etoro treats them the same way.

• Discovery: ETCs are included in the ETF category in the Discover section.
• Fees: etoro currently does not charge commission on non-leveraged ETF or ETC positions. Fees are set by the fund or issuer and vary by product.
• Trading: Like ETFs, ETCs are traded on securities markets. Orders are executed during market hours, subject to market conditions.

Commodity ETFs vs ETCs: Key differences at a glance

• Legal structure: Commodity ETFs are investment funds, while ETCs are debt securities.
• Typical use: Commodity ETFs may offer broader or thematic exposure; ETCs often focus on a single commodity.
• Price exposure: Commodity ETFs provide commodity exposure through a fund structure; ETCs provide commodity exposure through a debt security linked to the commodity’s price.
• Diversification: Commodity ETFs may hold related assets; ETCs usually focus on one commodity.
• Regulatory framework: Where commodity ETFs face limits on holding physical commodities, ETCs are commonly used for more direct commodity price tracking.