Best 5 Gold ETFs, Considering Market Capitalization: Value And Demand Of Gold ETF?

Updated: Thursday, January 6, 2022, 12:24 [IST]

Inflow and outflow in gold ETFs will highlight the investors' interest in short-term and long-term opinions and desires to have a position in gold. Generally, a physical gold holding will impose a long-term investment tool, due to lesser liquidity of gold coins, bars, or ornaments, rather than virtual gold. Additionally, often investment in physical gold will pressurize your pocket far more, than online gold. Hence, there is a reason for investors to prefer gold exchange-traded funds (ETFs). Gold ETF is one of the most secured online investments, as these are subject to SEBI Mutual Funds Regulations. However, the price of the same is variable and will depend on domestic physical gold rates in India.

Value of Gold ETFs

Gold ETFs are also like other exchange-traded funds, those are regulated by the SEBI. Gold ETFs will derive their prices from the current market value of gold in a country. The value of the same will be derived depending on the gold prices polled by the London Bullion Market Association (LBMA). Later, the rates will be converted to the Indian metrics and Indian currency (INR). As, India does not produce much gold, so the country has to import it from outside markets. Hence, the domestic gold rates will additionally depend on the transportation charges, taxes, customs duty, additional levies, etc. Gold ETFs will invest your money in gold which has the highest purity, of at least 99.5%.

When you will invest in Gold ETFs, you will be charged with an expense ratio, like all other ETFs. This will include charges for the storage and handling of physical gold at their vaults. Additionally, it will include the insurance coverage of your gold investment. In case of any unprecedented calamities, your gold will be safe.

Best Gold ETFs, In Terms of Market Capitalization (MC)

The last traded price of SBI Gold ETF stood around Rs. 4,258.60, and the Market Capitalization of it is around Rs. 325.39 crore. The last traded price of Invesco Gold ETF stood around Rs. 4,305.00, and the Market Capitalization of it is around Rs. 49.20 crore. The last traded price of HDFC Gold ETF stood around Rs. 42.62, and the Market Capitalization of it is around Rs. 6.56 crore. The last traded price of UTI - Gold stood around Rs. 41.58, and the Market Capitalization of it is around Rs. 5.77 crore. The last traded price of Nippon ETF Gold stood at around Rs. 41.47, while the Market Capitalization of it is around Rs. 4.25 crore.

Hence, the SBI Gold ETF has the highest MC, and the Nippon ETF Gold has the lowest MC among the above-mentioned gold ETFs. However, in terms of returns and performance in the markets, the UTI - Gold ETFs have one of the best records among them. Apart from these funds, the Axis Gold ETF has also performed considerably well, with a Market Capitalization of Rs. 3.20 crore.

The importance of Market Capitalization can be seen when you will like to withdraw your position. If you witness that the gold rates are falling at some point, and you can face many losses with gold ETFs, you might not stay in the investment. So, if a platform has a better MC, it will be easier for you on the liquidity ground. Hence a company with better MC, offer more security.

Gold ETF investment amount

UTI Gold ETF, HDFC Gold ETF, ICICI Prudential Gold ETF, Kotak Gold ETF, and Axis Gold ETF, will offer the investors a 0.01 gram of gold, per unit of gold ETF. On the other hand, SBI ETF Gold, Invesco India Gold ETF, and Aditya Birla Sun Life Gold ETF will offer the investors a 1.00 gram of gold, per unit of gold ETF. So, the prices vary among them on a large scale, depending on the amount of gold. You can buy these gold ETFs from the mutual fund apps like Groww, etc. Additionally, Gold ETF rates will be listed on the website of BSE/NSE, and you can buy or sell the gold ETFs any time through a stockbroker.

Additionally, gold ETFs are subject to tax. After you hold a position in a gold ETF for more than 3 years, you will be taxed with Long-term gains at a 20% rate, with the indexation benefit. If you withdraw your position in the same investment before 3 years, you will have a short-term capital gain.

Gold ETFs Demand

Gold prices, in the last year, surged to new highs, while the precious metal failed to sustain in the same position. So, with a price fall in gold, investors showed increased demand. This certainly impacted positively on gold ETFs, along with gold jewelleries. October- was is the festive season in India, and this period, every year, exhibits an augmented demand for the metal. According to the latest available data, Gold ETFs attracted around Rs. 303 crore in October, this year. Additionally, in a report titled 'Global gold-backed ETF flows - November 2021', the World Gold Council mentioned, "Gold-backed ETFs experienced net inflows of 13.6 tonnes (t) (US$838mn, 0.4% AUM) in November, the first month of positive flows since July. Inflows into North America and Europe well exceeded outflows from Asia, which saw negative flows for the first time since May."

(Data till December, 29, 2021)

(Also read: What Is Gold ETF? How Is The Gold ETF performing Globally: Should You Invest?)