What is Gold ETFs (Exchange Traded Funds)


In India, gold is conventionally regarded as one of the safest investment options and a store of value. In case you look forward to investing in gold, you must look beyond gold jewellery. Jewelries’ are not made up of pure gold, you also incur making charges, moreover, one cannot get full price while selling them. Other alternative is to buy gold coins from banks/jewelers in sealed packets. But banks or jewelers normally levy 5%-10% higher charge than the market price of the gold. You may also face problems in selling them, and most probably you might end up selling them at a discount.

I propose to you a better, a more efficient way to invest in gold: Invest in gold ETFs.

What are gold ETFs (Exchange Traded Funds)?

Source: Simplifiedfm.com

ETFs are akin mutual funds with a small difference. A mutual fund will buy stocks. In its place, gold ETF purchases gold. They are traded in stock exchanges. Just like stocks and mutual funds, one may buy gold ETFs in your demat account. They generate returns which closely resemble the returns from physical gold in the spot market.  Normally 1 share of gold ETF is approximately equivalent to 1 gram of gold, and thereby cost of 1 share of gold ETF is also nearly equal to price of 1 gram of gold. One can buy a minimum of 1 unit of gold ETF that is nearly equal to 1 gram of gold. Enlisting few Gold ETFs that are exist in the market. One may buy them directly in their demat account.

  • Benchmark Gold ETF( Gold Bees)
  • Kotak Gold ETF
  • Reliance Gold ETF
  • Axis Gold ETF
  • HDFC Gold ETF
  • SBI Gold ETF
  • Religare Gold ETF
  • Birla Sun Life Gold ETF
  • Quantum Gold ETF

To obtain more information of various Gold ETF schemes, visit: www.nseindia.com.

Benefits of choosing Gold ETFs over other traditional Gold Investments:

Convenience: Hassle free, convenient and allows for flexibility. One can buy/sell gold etfs at a simple click of the mouse. It does not involve costs for making and storing gold like in physical gold. In case you buy gold coins/bars/jewellery there are problems when you wish to sell it as you need to find a suitable buyer.

Purity of Gold: Also you are not certain with regards to purity of the gold and hence, might end up selling it at a discount which is not the case in Gold ETFs.

Minimum Investment: Considerably low on Gold ETFs. One is entitled to purchase 1 unit of Gold ETF that is nearly equal to 1 gram of gold. Hence, by purchasing few units, you may gradually build up your portfolio. Once you sell it, you will not get physical delivery of gold. You will receive the ongoing market price of the ETF that is nearly equal to price of 1 gram of gold/unit/ETF. In case you want physical delivery of gold on selling, you can opt for another product: E- gold which is launched by the National Spot Exchange Limited.

Advantages of Gold ETFs over Physical Gold:

Let us now discuss the advantages of Gold ETFs individually over physical gold purchased from jewellers and banks.

Source: fpa.edu.in

Hence, after tak­ing into consideration all the fac­tors, gold ETFs seem to a bet­ter alternative to physical gold.

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