Gold, an essential component of investment portfolios, can be acquired either physically or electronically through Gold Exchange Traded Funds (ETFs). These ETFs have been gaining significant attention, with July witnessing a noteworthy net inflow of Rs 456.15 crore compared to Rs 70.32 crore in June, according to Association of Mutual Funds in India (AMFI) data.
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Gold ETFs function as electronic representations of physical gold, stored electronically in a demat account. These ETFs are listed on stock exchanges, providing real-time price updates. Unlike SIP-based investments, gold ETFs offer flexibility for experienced investors to analyze the market and invest based on their understanding, while SIP investments are more user-friendly for beginners.
Gold ETFs typically invest 90 percent to 100 percent in 995 pure gold, allocating the remainder to debt. Their liquidity is a distinct advantage, as they lack exit loads. This means investors can buy or sell units at any time during market hours, providing ease and convenience.
Each unit of a gold ETF corresponds to 1 gram of gold, convertible into metal when required.
What's leading inflows
Experts highlight that considerable risks continue to surround developed economies. With rising interest rates in the US, persistent inflation, and slowing growth rates, the allure of gold as a safe haven and hedge against inflation remains intact.
Gold ETF fared recently due to the continuous hike in gold prices. Investors are waiting for correction in gold and currently holding their investing in gold, experts said.
Available gold ETFs
| Gold ETF in India 2023 | |
| 1. | HDFC Gold ETF |
| 2. | SBI Gold ETF |
| 3. | IDBI Gold ETF |
| 4. | Axis Gold ETF |
| 5. | Kotak Gold ETF |
| 6. | Aditya Birla Sun Life Gold ETF |
| 7. | Nippon India Gold ETF |
| 8. | Invesco India Gold ETF |
| 9. | Quantum Gold ETF |
| 10. | UTI Gold ETF |
| 11. | ICICI Prudential Gold ETF |
(Source: Groww)
Investment considerations
Bharadwaj of Trading Ways, suggests that Gold ETFs are a superior option compared to physical gold due to various factors such as purity, no entry costs, easy trading and liquidation, minimal storage concerns, and reduced taxes.
However, given the current high gold prices, it's advisable to pause investments for the next 12 months to allow for a healthy correction. Alternatively, those seeking to engage in systematic investment planning (SIP) can opt for Gold ETFs, experts said.
To understand, gold ETFs provide investors with a versatile and accessible means to invest in gold, particularly in uncertain market conditions. While the choice to invest should consider market dynamics, experts advise on the benefits of Gold ETFs over physical gold due to their inherent advantages.
First Published: Aug 11, 2023 11:14 AM IST
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