An exchange-traded fund (ETF) that tracks the domestic physical gold price is known as a Gold ETF. They are gold-focused passive investment instruments that invest in gold bullion and are based on gold prices. Gold in any form is attractive because of its track record. Different types of gold investment can be beneficial if we choose to consider different aspects. Gold in a tangible form, such as coins, bars, and jewelry, comes with prices, making it a riskier and more expensive investment.
What is Gold ETF?
Gold ETFs are open-ended mutual funds that are focused on constantly fluctuating gold prices. Gold ETFs have proven to be more valuable than physical gold because they offer the flexibility, liquidity, and tax efficiency of stock investments while still ensuring your investment in the yellow metal. However, keeping the same in paper form, such as gold exchange-traded funds (ETF), is a better bet, as ETF rates are closer to the real gold price.
Gold ETFs are similar to purchasing gold in an electronic format. These funds are traded on different exchanges, and if you have a Demat account, you can purchase them. You can buy Gold ETFs in the same way you buy stock shares.
How to Buy Gold ETF?
Physical gold bars with a purity of 99.5 percent are used to represent gold ETFs. Prices for gold ETFs can be found on the BSE/NSE website and can be purchased or sold at any time via a stockbroker. Gold ETFs, unlike gold jewelry, can be purchased and sold at the same price throughout India. ETFs that invest in gold are listed on exchanges and can be purchased and sold using a Demat account. Here are some of the Gold ETFs on NSE
Benefits of investing in Gold ETF
The gold's purity is assured, and each unit is backed by high-purity physical gold.
Gold is a tax-efficient investment since the income gained from it is viewed as a long-term capital gain.
ETFs are a good choice for investors looking to diversify their portfolios since they guarantee returns amid market uncertainty.
There is no income tax, security transaction tax, VAT, or sales tax.
There is no risk of theft since the units are held in a Demat. One also saves on the cost of a safe deposit box.
Loans can be secured with ETFs. No entry and exit load.
How many units/grams can you redeem?
You get the cash equivalent of your gold ETFs when you sell them on the exchange. However, in order to withdraw from a mutual fund, the number of units must be equal to the creation unit value, whether in cash or the form of actual gold.
The minimum quantity of gold or gold ETF units that an investor can buy or sell directly from a fund house is known as the creation unit size.
Since one unit of a gold ETF is usually equal to one gram of gold, the creation unit size is usually 1,000 units. So, if your fund's creation unit size is 1,000, you can buy and sell in multiples of 1,000.
How to sell or redeem Gold ETF?
Using a Demat account and a trading account, gold ETFs can be sold on the stock exchange via a broker. ETFs are better used as a method to profit from the price of gold rather than to gain access to real gold since they are backed by physical gold. When anyone liquidates Gold ETF Units, they are paid at the domestic gold market price.
If one keeps the equivalent of 1kg of gold in ETFs or multiples thereof, AMCs also allow redemption of Gold ETF Units in the form of physical gold on the ‘Creation Unit' scale.
You must contact the fund house and submit a redemption request, as well as notify your depository participant (DP) to move the requisite number of units to the fund house's DP account. Some fund houses use a different procedure, requiring the investor to send a repurchase request number (RRN) through his or her depository partner (DP) in order to relinquish units. The RRN is forwarded to the fund manager.
Who Should Invest in Gold ETF?
Gold ETFs are ideal for investors who wish to invest in gold but do not want to invest in physical gold due to the storage hassles, doubt about the purity of gold, and are also looking to get tax benefits. There is no premium or making a charge, so investors stand to save money if their investment is substantial.
Popular Gold ETFs in India
|Axis Gold ETF||AXISGOLD|
|Birla Sun Life Gold ETF||BSLGOLDETF|
|Canara Robeco Gold ETF||CANGOLD|
|HDFC Gold Exchange Traded Fund||HDFCMFGETF|
|ICICI Prudential Gold Exchange Traded Fund||IPGETF|
|IDBI Gold ETF||IDBIGOLD|
|Kotak Gold Exchange Traded Fund||KOTAKGOLD|
|SBI Gold Exchange Traded Scheme||SBIGETS|
|Quantum Gold Fund (an ETF)||QGOLDHALF|