Gold ETFs (Exchange Traded Funds)vs Physical Gold
Gold ETFs (Exchange Traded funds) are instruments that invest in 99.5 per cent purity gold. These are listed and traded on stock exchanges.
Every unit of gold ETF you buy lets you own 1 gram of physical gold.
All you need for investing in gold ETFs is a demat account and a trading account with a registered broker. It's as simple as trading in stocks and is a much better option that going for physical gold or gold coins
Why gold ETFs?
Easier to buy
When you buy gold ETFs, though you own a certain amount of gold, you don't actually get delivery of the yellow metal. You can store the units virtually in your demat account and save yourself the trouble of having to protect your physical gold.
Available is small denominations
Gold ETFs are available in small denominations One gold ETF unit represents 1 gram of gold. You can even buy half a gram of gold if that's all you can afford this month.
Don’t have to compormise on purity
Gold ETFs only deal in 99.5 per cent purity gold. So there is no question of purity which may arise in physical gold .
Easier to sell
As gold ETFs are traded in stock exchange you can sell it any time and get the market value where as physical gold to be sold in market either you have to bargain with the jwellers to get the right price as they are more intrested in selling gold rather than buying .
More tax efficient than physical gold
The taxation system for gold ETFs is the same as for non-equity mutual funds. If you hold gold ETFs for more than a year, you pay a long-term capital gains tax of 10 per cent without indexation or 20 per cent with indexation, whichever is lower, on the profits made. Gold ETFs held for less than a year attract short-term capital gains tax.
But in case of physical gold, you have to hold it for at least three years for the long-term capital gains tax
Wealth tax-free
Physical gold attracts wealth tax if you're holding more than a certain amount. At the moment, that amount is Rs 15 lakh. But there is no such taxation for gold held through gold ETFs.
| 3-M | 6-M | 1-Year | |
| Fund Name | Return (%) | Return (%) | Return (%) |
| Axis Gold ETF | 15.13 | 25.29 | N/A |
| Birla Sun Life Gold ETF | 15.28 | N/A | N/A |
| Goldman Sachs Gold ETF(earlier Benchmark Gold ETF) | 14.97 | 25.23 | 32.34 |
| HDFC Gold ETF | 15.34 | 25.52 | 32.59 |
| ICICI Prudentail Gold ETF | 15.28 | 25.38 | 32.16 |
| Kotak Gold ETF | 15.47 | 25.78 | 32.93 |
| Quantum Gold ETF | 15.51 | 25.80 | 32.97 |
| Reliance Gold ETF | 15.54 | 25.80 | 33.07 |
| Religare Gold ETF | 15.42 | 25.70 | 32.87 |
| SBI Gold ETS | 15.47 | 25.82 | 32.95 |
| UTI Gold ETF | 15.46 | 25.77 | 32.93 |
| As on 12th oct 2011 |
