By Gurjeet Singh Kalra, Head – ETF Sales, ICICI Prudential AMC

Gold is often regarded as a safe haven asset. We buy the precious metal to counter volatility and uncertainty. But investing in physical gold can be a challenge from a safety and storage standpoint. Here, Gold ETF (Exchange Traded Fund) emerges as a viable option. But what is a Gold ETF? Let’s find out.

What is a Gold ETF?

Gold ETFs are simply units representing physical gold that can be bought in a dematerialized form. Gold ETFs track domestic physical gold pricing and are listed and traded like a company stock on the NSE/BSE. When you invest in gold ETFs, you don’t actually own physical gold but instead, you hold the cash equivalent of the price of gold. Likewise, when you sell gold ETFs, you don’t receive physical gold but instead, get the cash equivalent of the price of gold at that point in time.

How to buy or sell gold ETF investment

You can buy and sell Gold ETFs for as low as one unit on BSE or NSE using a Demat account. For those investors who do not have a Demat account, they have the option of investing in Gold ETFs using the Gold Fund of Funds. A Gold Fund of Fund invests in Gold ETF. Through such an offering investors can opt for investing in the yellow metal through SIP or lump sum.

What are the advantages of investing in Gold ETFs?

  1. First, by investing in Gold ETFs, you do not have to face any storage hassles nor be worried about theft. Since Gold ETF units are held in Demat form, there is no requirement for a locker to keep your holdings safe. In effect, you also save on locker charges.
  2. Second, since Gold ETFs are regulated entities, an investor need not worry about the purity aspect of holdings. You can be rest assured that the purity levels will always be 99.5 per cent or higher.
  3. Third, when purchasing Gold ETF units there is no premium, making charges or any other costs involved.
  4. Fourth, there is absolute transparency on the gold pricing when buying or selling in the form of Gold ETFs.
  5. Fifth, the cost of acquisition is very low. When buying gold in the form of jewellery, investors have to accumulate a certain amount to make a purchase. When it comes to Gold ETF, investors can start investing for as low as Rs 45, which is the price of 1 unit of ICICI Prudential Gold ETF. (As of Oct 20, 2022).

To conclude, Gold ETF is an efficient way to take exposure to physical gold without having to worry about storage, security or purity hassles. Another benefit of holding Gold ETF is that it is a portfolio diversifier and provides a hedge against inflation and volatility in other asset classes. So, if your investment portfolio has gold ETFs, not only do you gain from capital appreciation but also provide a cushion to the overall portfolio from market extremes. In short, Gold ETFs emerge as a simple and cost-effective investment opportunity when it comes to gaining exposure to gold.