Gold ETFs are highly regulated thereby ensuring that investor interest is protected at all times
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Investment in gold can be done in the form of Physical gold, Sovereign Gold Bonds, Gold ETF, Gold Funds. Gold ETFs are basically exchange-traded funds that invest in gold. They are traded on the stock market and make direct investments in gold. Traditionally, festivals and weddings have been the major drivers for gold purchase, and buying the yellow metal is considered auspicious.
“Today there are various avenues through which one can invest in gold. Of these, Gold ETFs is one of the easiest and transparent ways to take exposure to the yellow metal. Over the last couple of years, investors have increasingly preferred Gold ETFs as can be seen through the rising folio count," said Nitin Kabadi, Head - ETF Business, ICICI Prudential AMC.
Should you buy Gold ETFs this Diwali
He added that by investing in Gold ETFs, one need not worry about risk factors associated with physical gold like theft, purity, illiquidity, and storage cost as the units are held in a demand account.
“One can buy Gold ETF by investing an amount as low as ₹50 and the transaction, be it buy or sell, can be executed at any time during the trading hours on the exchanges," said Nitin Kabadi.
Benefits of Investing in Gold ETFs
Another benefit is that gold ETFs are highly regulated thereby ensuring that investor interest is protected at all times. Apart from these, Gold ETFs tend to be tax efficient as it is subject to long-term capital gain tax with indexation benefits.
Gold ETF’s is the most liquid ways to invest in gold internationally
“Exchange-Traded Funds are one of the most liquid ways to invest in gold internationally. However in India, there are 11 listed gold ETF’s, and investments in this mode of an asset are for those who want easy liquidity at their fingertips," said Mr Prathamesh Mallya, AVP- Research, Non-Agri Commodities and Currencies, Angel One Ltd.
However, if one wants to invest in Gold ETFs, they need to have a Demat account."Gold ETF provides a similar value to SGB as it is also linked to gold prices but it has no exit restrictions. ETF requires Demat account hence it can only be availed by people who understand how investing works," said Nitin Misra, Co-founder, Indiagold
A recent report by Acuité Ratings & Research Ltd showed that India’s gold imports were at a decade-high level in the first half of FY22, as a mild correction in domestic gold prices by 2.7% from the peak seen in May further provided a fillip to domestic gold demand. “It is also likely that a part of increased household savings in the higher income categories are being partly deployed in physical gold as it has been traditionally considered to be a safe haven in an environment where the risks of the pandemic continue to exist," said Suman Chowdhury, chief analytical officer, Acuité.