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How you can Invest in Gold ETF Funds

Give your investments the power of gold.
Gold’s most valuable contribution to a portfolio, lies in the fact that it has a low correlation with most other assets. This is due to the fact that the factors affecting the price of gold differ from those that influence the price of most other asset classes.

What is Gold ETF?
A Gold ETF is an ETF whose assets are invested in gold bullion with the objective of generating returns that are in line with the performance of gold (and gold related instruments including derivatives – as and when permitted by SEBI) subject to tracking errors.

How do Gold ETFs differ from physical gold?
Unlike physical gold, Gold ETFs are held in demat / electronic form and can be traded on a stock exchange just like buying and selling stocks.

How are Gold ETFs better than physical gold?
Gold ETFs score over physical gold, because they eliminate the hassles and drawbacks of physical gold (e.g. impurity risk), are more tax-efficient and allow you to invest in small amounts.

How are Gold ETFs better than Gold Funds?
Gold ETFs are better than Gold Funds because in comparison to Gold Funds, Gold ETFs are less volatile. While gold ETFs invest in physical gold, Gold Funds invest in equities of gold mining companies; and gold stocks are more leveraged to the gold prices than the gold itself.

What is the purity of the underlying gold?
Gold ETFs invest in standard gold bullion with purity (fineness) of 995 parts per1,000 (99.5%) or higher.

How are Gold ETFs taxed under Income Tax Act, 1961?

Gold ETFs schemes are treated like non-equity mutual funds for the purpose of taxation.So, the gains attract short term capital gains (STCG) tax if held for less than one year and long term capital gains (LTCG) tax if the period of holding is more than a year.

What are main benefits in investing in Gold ETFs Fund?
Assured purity
No storage or security concerns
Easy liquidity
Trade in small amounts

Why should an investor invest in Gold ETF?

  • No worry on adulteration
  • Gold provides diversification to the portfolio
  • Gold is considered as a Global Asset Class
  • Gold is used as a Hedge against Inflation
  • Gold is considered to be less volatile compared to equities
  • Held in Electronic Form
  • Store of value
  • Extremely Liquid

Advantages of Investing in Gold ETFs

  • Potentially cheaper to have price exposure to gold price as compared to other available avenues
  • Quick and convenient dealing through demat account
  • No storage and security issue for investors
  • Transparent pricing
  • Taxation of Mutual Fund
  • Can be traded on stock exchange like buying / selling a stock
  • Ideal for retail investor as minimum lot size to trade is one unit on secondary market
  • NAV of a unit will track price of approximately ½ or 1 gram of gold

Investor Requirements for trading in Gold ETF

  • Trading account with a stock exchange broker
  • Demat account as Gold ETF can be traded only in demat form

Which Amc's offer Gold ETF Funds?
1. HDFC Gold Exchange Traded Fund 
2. ICICI Prudential Gold ETF NFO or ICICI Gold Exchange Traded Fund
3. Reliance Gold Exchange Traded Fund
4. Kotak Gold Exchange Traded Fund
5. Gold Bench Mark Exchange Traded Fund
6. UTI Exchange Traded Fund
7. Quantum Gold Fund Exchange Traded Fund

 Also Refer:NSE Codes for Gold ETF funds (Exchange Traded Funds)

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