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GOLD ETF

A Gold ETF is an exchange-traded fund (ETF) that aims to track the domestic physical gold price. They are passive investment instruments that are based on gold prices and invest in gold bullion

In short, Gold ETFs are units representing physical gold which may be in paper or dematerialised form. One Gold ETF unit is equal to 1 gram of gold and is backed by physical gold of very high purity. Gold ETFs combine the flexibility of stock investment and the simplicity of gold investments.

Buying Gold ETFs means you are purchasing gold in an electronic form. You can buy and sell gold ETFs just as you would trade in stocks. When you actually redeem Gold ETF, you don’t get physical gold, but receive the cash equivalent. Trading of gold ETFs takes place through a dematerialised account (Demat) and a broker, which makes it an extremely convenient way of electronically investing in gold.

Because of its direct gold pricing, there is a complete transparency on the holdings of a Gold ETF. Further due to its unique structure and creation mechanism, the ETFs have much lower expenses as compared to physical gold investments.

How to trade in Gold ETFs?

To trade in gold ETFs, you would need to open a Demat account through which you can invest in gold on an online platform through a broker. This is a seamless and secure way of buying or selling gold ETFs.

Benefits of Gold ETFs

• By trading in gold ETFs, purity is a given factor as every unit is the equivalent of physical gold of the highest purity.
• When you are investing in gold ETFs, there is no storage hassle, as you are dealing with a dematerialised form of the yellow metal.
• Investing in physical gold, particularly by way of jewellery, means you have to spend on making charges which can be anywhere in the 10-20 per cent range.
• With liquidity, gold ETFs offer a huge advantage over physical gold. You just need to open a Demat account and start trading. With a trading account, you can effortlessly trade on gold ETF without any entry/exit load when you buy/sell gold ETFs via your trading account.
• Gold ETFs don’t involve VAT, sales tax or wealth tax.
• Investing in gold ETFs is tax-efficient as any income you earn from them is classified as a long-term capital gain.

How to Invest in Gold ETFs?

Open a Demat account; typically platforms offer a Demat and trading account that you can open online.
Provide the necessary basic documentation such as PAN card, and proof of address and identity.
Once you get yourself an account, you can choose a gold ETF and buy one.
The units get credited to your Demat account. When you wish to redeem your ETF, you will receive the cash equivalent of the value of gold.

Who should invest in Gold ETFs?

Gold ETFs are the best option if you want to invest in gold instead of wearing it. You can use gold ETFs as a hedge against any kind of volatility. It helps in diversifying your assets and ensuring your portfolio is well-balanced.

RISKS

Gold ETFs are subject to market risks impacting the price of gold. Gold ETFs are subject to SEBI Mutual Funds Regulations. Regular audit of the physical gold bought by fund houses by a statutory auditor is mandatory.

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