Winning Bizness Desk

Mumbai. With rising gold prices, investments in Gold ETFs have surged. In January, India witnessed a record investment of $40 crore (₹2,950 crore) in Gold ETFs. Previously, the highest investment was recorded in October 2024 at ₹1,962 crore.

Gold ETFs have provided returns of up to 35% over the past year. If you are considering investing in gold, Gold Exchange Traded Funds (ETFs) can be a great option. Here’s everything you need to know about Gold ETFs.

Gold ETFs Are Based on Fluctuating Gold Prices

Exchange Traded Funds (ETFs) are directly linked to the fluctuating gold prices. One unit of a Gold ETF represents 1 gram of pure gold. Gold ETFs can be bought and sold on stock exchanges like BSE and NSE, similar to shares. However, investors do not receive physical gold; instead, they get the equivalent value in cash when exiting the investment.

5 Benefits of Investing in Gold ETFs

Buy Gold in Small Quantities: Gold ETFs allow investment in units, where one unit equals one gram of gold. This enables investors to buy in smaller amounts or through a Systematic Investment Plan (SIP). In contrast, physical gold is generally sold in multiples of 10 grams, making small purchases difficult at jewelers.

Assured Purity: Gold ETFs follow the pricing standards of the London Bullion Market Association, a global authority on precious metals. This ensures a transparent and uniform price. Physical gold prices may vary depending on the seller, and its purity may not always be guaranteed. Gold ETFs provide 99.5% purity assurance, which is among the highest in the industry.

No Jewelry-Making Charges: Buying Gold ETFs involves a brokerage fee of 1% or less and an annual portfolio management charge of about 1%. This is significantly lower than the 8-30% making charges applicable to jewelry, coins, or bars bought from jewelers and banks.

Safe and Secure Investment: Gold ETFs exist in an electronic Demat account, which only incurs an annual maintenance charge. There is no risk of theft, unlike physical gold, which requires secure storage and incurs additional security costs.

Easy Trading and Liquidity: Gold ETFs can be bought and sold instantly without any hassle. Additionally, they can be used as collateral for loans, adding to their investment flexibility.

To invest in Gold ETFs, you need to open a Demat account through a broker. Once the account is set up, you can purchase Gold ETF units available on the NSE. The equivalent investment amount is deducted from your bank account linked to the Demat account. The Gold ETF units are credited to your account within two days, and they can be sold through the trading platform anytime..

Experts recommend that even if you prefer investing in gold, it should be done in moderation. Ideally, only 10-15% of the total portfolio should be allocated to gold. While gold investments can provide stability during economic crises, excessive allocation may lower overall portfolio returns in the long run.