In short: an ETC (exchange-traded commodity) is a security you buy on an exchange that follows the price of a commodity such as gold or oil. It looks like an ETF when you trade it, but it is a debt instrument issued by a company, not a fund. That means you depend on the issuer as well as on the commodity price, and a commodity pays no dividend. Its value can fall, and you can lose money.
You will see ETCs next to ETFs on a broker’s screen, and the names look alike. The difference matters for what you own and what can go wrong, so this page explains it step by step. We only explain; nothing here is a recommendation to buy or avoid anything.
What is an ETC?
ETC stands for exchange-traded commodity. It is a security listed on an exchange that is designed to follow the price of one commodity (gold, silver, oil) or a basket of them. You buy and sell it through a broker, like a share or an ETF, and its price changes during the trading day.
Legally, an ETC is a debt instrument. The European securities regulator ESMA says so in its Q&A on commodity derivatives: ETCs are debt instruments within the scope of Article 4(1)(44)(b) of MiFID II (ESMA, Q&As on MiFID II and MiFIR commodity derivatives topics, Question 7, last updated 23 September 2022, checked 2 November 2026). In plain words: an ETC is an IOU issued by a company, whose payout is linked to a commodity price. You are lending to the issuer, not buying a share of a fund.
How does an ETC differ from an ETF?
- What it is: an ETF is a fund that holds shares or bonds for you; an ETC is a debt instrument issued by a company. A UCITS ETF follows the UCITS rules on spreading and on keeping its assets with a separate depositary; an ETC does not fall under those fund rules.
- What it follows: most ETFs follow an index of companies. An ETC follows a commodity price.
- What can go wrong: both can fall with their market. An ETC has an extra risk: if the issuer fails, you may not get back what the commodity would have been worth.
- Income: a share can pay a dividend and a bond pays interest; a commodity pays nothing. The only way an ETC gains is that the price of the commodity rises, and it can just as well fall.
Physical or swap-based: how is an ETC backed?
Issuers back their ETCs in different ways, and the difference is in the prospectus. In a physically backed ETC, the issuer holds the metal (for example gold in a vault) against the securities it has issued. In others, the issuer holds contracts, such as futures or swaps, that follow the price. Some issuers also pledge collateral to reduce the risk to investors. How well that works depends on the arrangement, so read the issuer’s documents instead of assuming from the name.
Be aware too that holding an ETC does not make you the owner of the metal itself. You hold a claim on the issuer, which may be backed by metal.
What is issuer risk?
With a fund, the assets are kept separately from the fund manager, so if the manager fails the assets are still there (see UCITS). With an ETC, you are a creditor of the issuer. If the issuer cannot pay, you stand in line with other creditors, and the backing, if any, is what determines how much comes back. That risk is on top of the commodity price risk. It is the main reason an ETC is not simply “an ETF for gold”.
What does an ETC cost, and where do you find the costs?
An ETC usually has a yearly fee that comes out of its value, much like the TER of an ETF, plus the broker’s order fee and the spread when you trade. The yearly fee is stated in the issuer’s prospectus and final terms, and in the Key Information Document (KID) if there is one for the product; your broker’s product page also shows it. Because the name does not tell you how the ETC is built, check the fee and the structure in the same place. For the order fee and spread, see What does buying stocks cost?
Is a commodity ETC the same as an ETN?
Not quite, but they are close relatives. An ETN (exchange-traded note) is also a debt instrument that follows an index or a market. People use “ETC” for products that follow commodities and “ETN” for products that follow other things. The credit risk of the issuer applies to both.
Frequently asked questions
Does an ETC pay a dividend?
No. A commodity such as gold produces no income, so an ETC has no dividend. The result depends only on the change in the price, minus costs.
Does an ETC carry less risk than an ETF?
No. Both can lose value. An ETC adds issuer risk and follows one commodity, which can swing more than a broad share fund.
Is an ETC the same as “etc.” in a sentence?
No. In investing, ETC means exchange-traded commodity. Searching for it with extra words, such as “exchange-traded commodity” or “ETC gold”, helps.
Can I buy an ETC in the Netherlands?
Many brokers that serve Dutch investors list ETCs next to ETFs. Which ones, and at what cost, differs by broker; check the broker’s own list and fee page.
Does Box 3 apply to an ETC?
In general terms, investments you hold privately fall in Box 3, whatever their form. The rules are being reformed, so check the Belastingdienst for the current situation.
Related pages
Sources
- ESMA, Questions and Answers on MiFID II and MiFIR commodity derivatives topics, Question 7 (last updated 23 September 2022), checked 2 November 2026.
Investing involves risk of loss. The figures presented by this calculator are for illustrative purposes only and do not constitute financial advice. Past performance does not guarantee future results.
This is general information, not tax or investment advice. For your own situation, consult a qualified tax adviser, a financial adviser licensed by the AFM (the Dutch financial markets authority) or the Belastingdienst.