Gold ETFs are highly liquid and have physical asset backing: Infinity Alternatives

Gold ETFs allow individuals to invest in gold in a dematerialised format, which can be bought and sold on the stock exchange just like shares. Gold equivalent to physical quantity is deposited in an electronic form, in the purchaser’s demat account. In this latest episode of, ‘Mutual Fund Corner’, Anubhav Srivastava, Partner and Senior Fund Manager at Infinity Alternatives discussed in length about investing in gold ETFs.

Gold ETFs in November saw an outflow of Rs 195 crore against the October inflow figure of Rs 147 crore. In fact, global ETFs saw a net outflow of $3 billion in October. So, what drove this volatility?

Srivastava said, “The first big factor that has moved gold prices is the US dollar strengthening. So, when the gold demand doesn't change, and the dollar strengthens, gold demand will fall, because in dollar terms it becomes more expensive.”

Talking about key benefits of investing in gold ETFs, he said, “Technically, you could get hold of that gold that is lying there. So, there is a physical asset backing the units that are out there. Secondly gold ETFs are very liquid.”

On taxation, Srivastava said, “Gold ETFs fall under this other than equity taxation which means you will get 20 percent long term after three years. Short-term selling and buying gold ETFs will eventually end up with your gains being added to your income so you will pay the marginal tax rate there.”