GOLD ETFs(Gold Exchange Traded Funds)

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GOLD ETFs(Gold Exchange Traded Funds)

 

Gold ETF

GOLD ETFs(Gold Exchange Traded Funds) is a commodity ETF that consists of only one principal asset: gold. Exchange-traded funds act like individual stocks, and they trade on an exchange in the same manner.

GOLD ETFs(Gold Exchange Traded Funds are funds which primarily invest in gold and can be bought and sold on the exchange. Gold ETFs are essentially open-ended mutual fund schemes which are based on ever-fluctuating gold prices. Gold ETFs have proved to be worthier than physical gold, since gold ETFs not only ensure your investment in the yellow metal, but also provide the flexibility, liquidity and tax efficiency that come with stock investments.

Investors use gold ETFs to track and reflect the price of gold. While the assets in the fund are backed by the commodity, the intent is not for an investor to own gold.

Investors use gold ETFs to track and reflect the price of gold. While the assets in the fund are backed by the commodity, the intent is not for an investor to own gold.

Investors use gold ETFs to track and reflect the price of gold. While the assets in the fund are backed by the commodity, the intent is not for an investor to own gold.A gold ETF gives an investor an opportunity to gain exposure to the performance, or price movements, of gold.

Buying Gold ETF is purchasing gold in electronic form.

GOLD ETFs(Gold Exchange Traded Funds)  was launched in India in 2007 and has gained popularity due to its hassle free process and various benefits. Gold ETF is listed and traded on the National Stock Exchange and Bombay Stock Exchange like any other stock of a company. Gold ETF is nothing but your digital gold which has lesser expenses as compared to physical gold investments.

BENEFITS OF INVESTING IN GOLD ETF’S:

(1)TAX BENIFITS:

Unlike physical gold, Gold ETFs do not levy any wealth tax. It is tax efficient and there are no additional charges in terms of VAT, sales tax, and security transaction tax. No wealth tax means you can hold on to your gold ETFs for a longer period of time.

(2)NO PREMIUMS OR MARKETING CHARGES:

Gold ETF is in many ways, a superior value for money investment vis-à-vis gold jewellery, as the cost of the latter includes making and depreciation charges which often amount to as high as 17% of the total charge, whilst brokerage charges for ETF comes to only 0.5%. Additionally, you end up paying a premium for gold coins & bars purchased from banks and jewelers charge extra as making charges. With GOLD ETF, you don’t have to pay any premium, making or delivery charges. Yet whenever needed, you can exchange them in multiples of 1kg units for 0.995 purity.

(3) NO WORRIES OF THEFT:

You always worry about the safety of your gold and also end up paying for bank lockers. Buying Gold ETF is purchasing gold in electronic form. With Gold ETF, since your gold is now in demat form, there are no worries of theft and you also save on locker charges.

(4)EASY TO SELL:

Unlike gold coins and bars, which the banks don’t buy back and most jewellers only offer to exchange but not buy back, Gold ETFs can be sold anytime through your broker at transparent prices. Plus, unlike other forms of gold, you get the same price for your Gold ETF across India. On Gold ETF, you pay no sales tax, securities transaction tax, VAT or wealth tax.

(5)Transparency

Each unit you buy is backed up by the highest purity of gold and you can easily track real time gold prices. Unlike physical gold price, which usually varies in different jewelers shop, the price of gold ETF units is constant everywhere. All the information about the current prices is public and instantly available. The transparent process of gold ETF makes it more beneficial than investments in physical gold.

(6)Accepted as collateral for loans:

The gold ETF can be used as collateral security when you are in need of monetary help from the financial institutions. If needed you can use Gold ETF as collateral for loans.

Comparison of GOLD ETFs vs GOLD BARS vs JEWELLERY

Transaction Charges Jewellery Gold Bars Gold ETFs
Purchase Making charges of 15-20 % 10-20 % mark up charges by banks Brokerage of 0.5% or even less
Sell 10-20 % is lost due to purity issues1 Banks do not take it back, so premium paid at time of purchase is written off Brokerage of 0.5% or even less
Maintenance Insurance charges and locker charges (if you put in locker) Insurance charges and locker charges (if you put in locker) 1.00%
Tax Implications Long term capital gain, but after 3 years, plus wealth tax Long term capital gain, but after 3 years, plus wealth tax Long term capital tax

 

How to Buy Gold ETFs Online:

To invest in gold ETF, you need to have a Demat account and an online trading account. To open an account, you would require a PAN Card, an address proof and an identity proof. After the account is ready, you can choose a Gold ETF and place an order. Once the trade is executed a confirmation is sent to you in your account. A small fee from the fund house and the broker is charged when one buys or sells these Gold ETFs.

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