A quick look at the costs you have to pay when trading in Gold ETFs

Published: Monday, October 6, 2014, 9:34 [IST]

Gold ETFs are an excellent form of buying gold, when compared to physical gold. Since they are held in electronic form you need not worry about theft and need not hire a bank locker, which is a major advantage of Gold ETFs.

How to trade in Gold ETFs?

Gold ETFs can be bought through the stock exchanges in India. Some of the popular Gold ETFs in India include the SBI Gold Exchange Traded Fund, Reliance Money, Axis Gold ETF, HDFC Gold Exchange Traded Fund.

To trade in Gold ETFs one needs to open a demat and broking account, just like one opens for the equity markets in India. Once you have opened the account you can buy and sell gold ETFs, just like you do for shares.

What are the costs involved for trading in Gold ETFs?

Each time you buy and sell this instrument there will be a brokerage charge that is applicable, just as you buy and sell shares. One advantage of trading in them is that they do not attract a security transaction tax.

However, since there is an asset management fee that is applicable the returns of Gold ETFs are unlikely to match that of actual gold.

Should you buy Gold ETFs?

The question of buying Gold ETFs or not would depend on whether you expect gold prices to rally or not? Gold ETFs track the prices of physical gold. In the last one year gold has given negative returns and so have Gold ETFs. So, if you are looking to buy gold ETFs you should know whether gold prices will rally. Over the last one year there has been a sharp revival in equity prices and investors have shifted focus to stocks and less on gold. If you have a long term perspective, than Gold ETFs may fetch you decent returns.

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Story first published: Monday, October 6, 2014, 9:34 [IST]