Gold Exchange Trade Funds or Gold ETFs are traded on the Stock Exchange Just like any other stock. These are units that are representative of physical Gold and their value is based on the price of physical gold. The Gold ETFs are represented by 99.5% pure physical gold bars One unit of Gold ETF is equal to one gram of gold at the time of purchase and hence the value of the ETFs moves in accordance to the global gold prices. ETFs offer a simpler and convenient way of owning physical gold. A Demat account is necessary for investing in Gold ETFs. On the redemption of Gold ETF, the Investor receives only the cash equivalent to the ETF and not physical gold.
Gold ETF offers the modesty of gold Investments along with the flexibility of Stock Investments. As the fluctuations in gold prices are far lesser than compared to fluctuations on the equity market, these funds act as a safety net for the Investors even if the returns on equity fall.
ETFs are widely used by Investors to diversify their portfolio. Gold ETFs can also be used as collateral security for loans. These funds do not attract Sales tax, Wealth tax, or Security Transaction tax.