At this time, when gold prices have been knocked down because of the Federal Reserve's hawkish stance and dollar's resilience on account of it, investing in gold ETFs can be a good take on the yellow metal right now.
This is as gold is always a good investment for long term which is considered a safe haven as also a hedge against inflation. Also, going forward as per experts in the domain, gold may see a pullback for some time before moving northwards again.
Now why gold ETFs?
Paper investment or financial investment into gold instead of the regular physical investment shall always bode well for investors as there is no risk such as risk pertaining to purity, storage etc. Also, as these ETFs come with low cost there is a benefit of low charges. Furthermore, for the investors there is no entry or exit charge in respect of Gold ETFs.
Pointers to note when investing in Gold ETFs
1. Gold ETFs can be traded like stocks and hence offer high liquidity:
In case the need arises, the investor need not panic of their money being stuck in Gold ETFs as they can be easily liquidated owing to their listing on exchanges. Also, there is no exit load.
2. Gold ETFs have to be maintained in demat account:
For Gold ETF, investor needs to have a demat account as they are held in a demat account Also, for executing trade in them, they can be carried through the investor's trading account.
3. For Gold ETFs, buying and selling does not impact their AUM:
Against the regular mutual funds, wherein investors buying or selling them increases or decreases the funds AUM, this does not happens for Gold ETFs. In case of Gold ETF only title or ownership gets transferred from one person to another.
4. Gold ETFs regulated by SEBI and have underlying as gold which is maintained by the custodian:
Gold ETFs have gold as their underlying asset. Usually, gold ETFs keep their physical gold with Bank of Nova Scotia
5. Gold ETFs are exposed to price risk:
The only risk that Gold ETFs face is that of price risk, say when gold price moves lower Gold ETF value goes down by the same proportion.
6. Gold ETFs taxation:
Being treated as non-equity, for short term gains the holding period of 3 years and less is considered. LTCG are taxed at 20% tax after providing the benefit of indexation. Also, these Gold ETFs do not carry STT or Securities Transaction Tax.
All in all, unlike other investments, gold investment is also a hedge that protects that value of your other investments in uncertain times when other investments falter.