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Gold ETFs in India

Top 8 Gold ETFs in India: A Comprehensive Overview 

Gold Exchange Traded Funds (ETFs) are like a cool new way for people to invest their money in gold without actually having to buy the physical stuff. It’s like having a little piece of gold without needing to keep it safe in your house or worry about thieves. 

Now, let’s take a deep dive into what these Gold ETFs are all about in India. We’ll check out what makes them tick, why they’re good for investors, the different kinds you can find, and which ones are the cream of the crop in the market. 

Features and Benefits of Gold ETFs in India 

Gold ETFs are like virtual piggy banks for gold, but instead of holding shiny bars, they invest in top-quality gold. You can buy and sell them easily, just like stocks, through apps or websites. Here are some cool things about them: 

Quick Cash: You can turn your gold ETFs into cash fast, no need to find a buyer for gold bar. 

Buy in Bits: You can start investing in gold with just a little bit of money, no need for a briefcase full of cash decks. 

Guard Against Price Hikes: When the economy gets shaky, gold stays strong, so your investment stays safe, as the value of gold typically rises during periods of inflation.  

Loan Backup: If you need some cash, you can use your gold ETFs as a backup plan to get a loan. In India, one can typically obtain a loan against Gold ETF units through authorized financial institutions offering such services, subject to their terms and conditions. Contacting these institutions directly or consulting with financial advisors can provide specific guidance tailored to individual needs. 

Types of Gold ETFs 

  1. Physical Gold ETFs: These ETFs are backed by real, physical gold bullion. When you invest in a physical gold ETF, your money is pooled with other investor’s funds and used to purchase actual gold bars, which are securely stored in vaults. Each share of the ETF represents a fractional ownership interest in these gold bars, which are securely stored in vaults.

    Each share of the ETF represents a fractional ownership interest in these gold bars. This type of ETF provides investors with direct exposure to the price of movements of gold, as the value of the ETF correlates closely with the prevailing market price of physical gold. 

Example: One of the well-known examples in India is the SBI Gold ETF, offered by SBI Mutual Fund. This ETF invests in physical gold and aims to track the domestic price of gold closely. Investors can buy and sell units of SBI Gold ETF on the stock exchange just like stocks, providing them with easy access to investing in gold without the hassle of storing physical gold. 

  1. Synthetic Gold ETFs: Unlike physical gold ETFs, synthetic gold ETFs do not hold physical gold. Instead,  they use financial instruments known as derivatives to track the price of gold. Typically, these derivatives include futures contracts, options, or swaps linked to the price of gold. By using derivatives, synthetic gold ETFs can provide investors with exposure to gold price movements without the need for direct ownership of physical gold.

    While this approach may offer flexibility and liquidity, investors should be aware of additional risks associated with derivatives, such as counter-party risk and potential discrepancies between the ETF’s performance and the actual price of gold. 

Example: An example of a synthetic gold ETF is the Quantum Gold Fund, offered by Quantum Mutual Fund. This ETF doesn’t hold physical gold; instead, it invests in gold derivatives to replicate the performance of gold prices. By investing in Quantum Gold Fund, investors can gain exposure to gold prices. By investing in Quantum Gold Fund, investors can gain exposure to gold price movements through financial instruments rather than owning physical gold. 

A serving soldier may fight the best, but the veteran will always remain the best guide!

Top Gold ETFs for 2024 

Here’s a tabular representation of the top gold ETFs for the year 2024: 

Name of the Gold ETF AUM Expense Ratio  Returns  Fund Manager 
Nippon India ETF Gold BeES ₹8,929 Cr 0.79% 1-Year: 16.01%
3-Year: 14.67%
5-Year: 16.02 %
Vikram Dhawan 
ICICI Prudential Gold ETF ₹4,946 Cr 0.50% 1-Year: 16.23%
3-Year: 15.53%
5-Year: 16.17%
Gaurav Chikane 
HDFC Gold Exchange Traded Fund ₹4,118 Cr 0.59% 1-Year: 15.95%
3-Year: 14.85%
5-Year: 16.14%
Bhagyesh Kagalkar  
SBI-ETF Gold ₹3,761 Cr 0.65% 1-Year: 15.32%
3-Year:14.82%
5-Year: 16.27% 
Vandna Soni 
Kotak Gold ETF ₹3,261 Cr 0.55% 1-Year: 15.39% 
3-Year: 15.20%
5-Year: 16.22%
Abhishek Bisen & Jeetu Valechha Sonar  
UTI Gold Exchange Traded Fund ₹979 Cr 0.46% 1-Year: 16.64%
3-Year: 15.11%
5-Year: 16.21%
Niranjan Das 
Aditya BSL Gold ETF ₹675 Cr 0.54% 1-Year: 15.62%
3-Year: 14.90%
5-Year: 16.35%
Sachin Wankhede 
Quantum Gold Fund ₹174 Cr 0.78% 1-Year:15.42%
3-Year:14.79%
5-Year: 16.11%
Ghazal Jain 
The table describes the best performing Gold ETFs in India and their details as of 20th May 2024.

Some More Numbers Dancing Around Gold ETFs 

  • As of December 2023, the total Assets Under Management (AUM) for Gold ETFs in India stood at approximately INR 14,000 crores. 
  • The average expense ratio for Gold ETFs in India ranges from 0.5% to 1%, making them cost effective investment options. 
  • In 2023. Gold ETFs in India witnessed a surge in trading volumes, with an average daily turnover of around INR 200 crores on major stock exchanges. 
  • The 1-Year return on investment for top-performing Gold ETFs in India ranged from 15% to 20%, outperforming many traditional investment avenues. 

Bottom Line 

Gold ETFs are like a sleek, futuristic ride of the investment world. But before you strap in, you’ve gotta check under the hood for things like hidden costs, glitches, and what’s happening in the wild world of finance. 

But here’s the real thrill: Gold ETFs aren’t just any old investment. They’re the golden goose of opportunities in India. Easy to use, they come packed with perks like tax advantages and the chance to rake in serious profits. 

So, if you’re all about the bling and ready to turn your cash into gold, Gold ETFs are your ticket to the big leagues. Get in on the action and watch your wealth sparkle like never before! 

For a personalized visual approach, grab your favorite snacks and enjoy this conversation between our in-house experts:

FAQs

Is gold ETF taxable in India? 

Gold ETFs are taxable in India. When selling a Gold ETF, the tax implications depend on the holding period. If the Gold ETF is sold within 3 years of purchase, it generates short-term capital gains, which are taxed at the individual’s income tax slab rates. On the other hand, if the Gold ETF is sold after 3 years of purchase, it incurs a Long Term Capital Gains Tax at a rate of 20% with indexation. 

What is the cost of 1 gold ETF? 

The cost of 1 Gold ETF unit is equivalent to 1 gram of Gold. Gold ETFs are traded in denominations of 1 gram of gold, making it a convenient and accessible way to invest in gold without the need to handle physical gold. 
 

What are the disadvantages of gold ETF? 

Some disadvantages of investing Gold ETFs include: 
Gold ETFs may not perform as well as physical gold during times of economic uncertainty or geopolitical instability. 
Gold ETFs are subject to market risks and price fluctuations, similar to other financial instruments. 
There are tax implications when selling Gold ETFs, depending on the holding period and the applicable tax rates. 

Is gold ETF risk-free? 

Gold ETFs are not entirely risk-free. While they offer a convenient way to invest in gold without the need for physical ownership, they are still subject to market risks and price fluctuations. Investors should consider the risks associated with market volatility and fluctuations in gold prices when investing in Gold ETFs. 
 

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