In case you do not have a broking account, you first need to open one along with which the broking firm would also open a demat account. To read more on what a demat account is click
You can open a demat and broking account with brokers like Sharekhan, Geojit BNP Paribas, Angel Broking etc. Many banks, including those in the public and private sector through their subsidiaries help you to open these accounts.
Once the account is opened...
After you have finished opening your account, you can buy and sell Gold ETFs. These are mutual fund units that represent actual gold of 99.5 per cent purity. So, they can be converted to physical gold. However, you may at times not get the exact price of gold as there are some transaction charges that would reduce the value. One ETF charges Rs. 750 per 10 grams for conversion.
But, at the end of the day there are some positives...
There are some positives from keeping Gold ETFs. For starters, you need not worry about theft, as the units are held in electronic form and be converted to physical form, only when you want. And, why would you want to convert it into physical form, unless there is a function or a marriage. Secondly, you do not have to worry about about bank locker charges etc.
Another interesting advantage is that while physical gold attracts Wealth Tax, there is no Wealth Tax payable on gold ETFs. Fund houses also ensure the purity of gold, so you do not have to worry much. A big disadvantage is that some broking firms will charge an expense ratio. There is one Gold ETF that charges as much as 1.3 per cent, which means that much gets deducted from the net asset value of the fund. This money is reduced from the NAV so although one unit of gold ETF is supposed to represent one gram of gold
The tax treatment is also a negative. For example, the tax treatment is more favourable to shares, especially the capital gains part. Shares do not attract long term capital gains, but, ETFs do.
Buying and selling
As mentioned earlier, once you open your account, you can buy the ETFs in a similar manner as you buy shares. But, unlike shares where there is a Securities Transaction Tax that is payable, there is no such tax that is payable on Gold ETFs. The brokerage may vary depending on the brokerage firm.
To read everything on Gold ETFs click here
While buying and selling ETFs do consult your broker. It's important to remember that Gold ETFs track gold prices and hence you must have a good understanding of the gold market before buying. Professional help on where gold could be headed must be sought. In the last one year for example, Gold ETFs have given negative returns, while the Sensex is up 50 per cent. So, seek professional help before deciding on buying a gold ETF.