Gold Exchange Traded Funds (ETFs) have rapidly emerged as one of the most popular investment avenues for those looking to diversify their portfolios with digital gold. With uncertainties in the global economy, geo-political tensions, and the search for inflation-resistant assets, gold ETFs have become a go-to solution for savvy Indian investors.
Gold prices in India experienced a slight decline today, with 24K gold priced at Rs 11,804 per gram, down Rs 65. Meanwhile, 22K gold fell Rs 60 to Rs 10,820 per gram, and 18K gold decreased by Rs 49 to Rs 8,853 per gram.
If you are still wondering whether you should consider gold ETFs instead of traditional gold, here are compelling reasons and performance data to help you make an informed decision.
Gold ETFs vs Physical Gold
Gold has long been seen as a hedge against inflation, currency volatility, and economic downturns. However, owning physical gold comes with concerns around purity, high making charges, storage risks, and liquidity issues. That’s where gold ETFs make a difference, as they let you own gold in digital form, offering convenience, safety, and market-linked returns without the hassles of safeguarding jewellery or coins.
Gold ETFs are mutual fund schemes that track the price of physical gold. Each unit represents a prescribed quantity of gold, usually one gram, and is backed by physical gold of high purity. These funds are traded on the stock exchange and can be bought or sold just like shares, ensuring transparency and liquidity. They are also cheapest way to hold gold at the expense ratio ranging from 0.30 percent to 0.80 percent.
Gold ETF: The big players and stellar returns
Let’s take a look at the top 5 gold ETFs in India, ranked by assets under management (AUM), which is an important metric of investor confidence and fund stability. According to Ace MF, Nippon India ETF Gold BeES tops the list with an AUM of Rs 23,832 crore, followed by HDFC Gold ETF at Rs 11,379 crore and SBI Gold ETF at Rs 9,506 crore, ICICI Pru Gold ETF at Rs 8,770 crore, and Kotak Gold ETF at Rs 8,315 crore.
The prime attraction of gold ETFs is their robust historical performance, especially during periods of market stress. Take a look at the recent track record:
In the year-to-date period, all top gold ETFs have delivered eye-popping returns in the 66 percent range, demonstrating how well gold has performed amid recent global uncertainty. The one-year returns are also robust, just over 50 percent across leading funds. Even over the three- and five-year windows, annualised returns have remained strong over 30 percent and 16 percent respectively making gold ETFs stand out as consistent wealth creators.
Gold ETFs can be bought or sold through your brokerage account on the stock exchange any time during trading hours at live market prices. This is a huge upgrade over traditional gold, where selling often involves discounts, purity checks, or making charges. The transparency of fund holdings, regular SEBI scrutiny, and the ability to start with very small investments (even a single gram) make gold ETFs accessible to everyone.
Tax and Cost Efficiency
Gold ETFs are considered more tax-efficient . Capital gains after 12 months qualify for long-term capital gains tax at 12.5% without indexation. The short term capital gain is taxed at your slab rate.
Gold ETFs eliminate worries about theft or storage costs, as the physical gold underlying each ETF unit is securely held by the fund in insured vaults. This means greater peace of mind for investors.
Why buy digital gold now?
Dhanteras is the time when one plans buying gold and silver as it is an auspicious occasion. Given their excellent recent performance, transparent pricing, high liquidity, and convenience, gold ETFs are a smart, future-ready way to add gold to your investment portfolio this festive season. Whether you are looking to hedge against economic risks, balance your investments, or simply seek solid long-term returns, the overall bullish sentiment for gold is expected to continue, albeit with less intensity.
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