Are Gold ETFs right for you?

Gold, the yellow metal, has always attracted people since the beginning of civilisation. It has always been the metal of choice as its value has mostly appreciated over time. Indians are fond of jewellery and prefer to buy gold in its physical form which has its own problems related to storage and risk of theft. Gold Exchange Traded Funds allow investors to buy gold in digital form as units of the ETF (credited to the Demat account), which has its price pegged to the physical gold price. Gold ETFs are a good choice for investors who want to add gold to their portfolio but wish to avoid the issues of physically storing them. A Gold ETF eliminates the worry about the purity of the gold as well as the hassle of keeping it safe while offering potential appreciation and tax benefits. Gold ETFs offer the dual advantage of digital trading at real-time prices while enjoying the benefit of a safer gold investment.

Here is why a Gold ETF is right for you.
Convenience – You can buy digital gold in the form of Gold ETF units that are linked to the physical gold price and can be traded online. 1 unit of Gold ETF is generally equal to 0.01 gram of gold. You can even opt for a Systematic Investment Plan (SIP) to invest in a Gold ETF, i.e. to invest a convenient amount on a regular basis.

Inflation hedge – Gold is considered as a safe option that can help hedge against currency fluctuation and inflation. While the purchasing power of the currency can fall due to inflation, investment in gold might not lose its value. This makes gold a sensible investment when inflation is rising.

Transparency – Gold ETF prices are published on the exchanges and they are easily tradeable. Gold ETF units can be bought and sold on the exchange and the rates are available to the public. One of the biggest benefits of Gold ETFs is the price transparency they offer. The units of Gold ETFs on the exchange reflect the actual fluctuation in the international price of gold and investors can benefit from the same by capturing the actual price while trading Gold ETF units. This transparency is not available while buying gold jewellery or bullion because they offer a daily price where intraday fluctuations may not always be captured.

Single rate – Unlike physical gold where prices may vary due to local levies, Gold ETF units reflect the actual price of gold in real-time.

Low transaction cost – There are no entry or exit loads on the purchase and sale of Gold ETF. Although, you will have to pay the brokerage charges levied by your trading platform.

Tax benefits – If you hold your Gold ETF for more than 36 months, long-term capital gains tax will be applicable. Short-term capital gains will be added to income and taxed as per income slabs. There is no wealth tax, GST or securities transaction tax applicable to Gold ETFs.

Investors are requested to contact their tax advisors/consultants for more details.

Peace of mind
– Storing physical gold is a risky proposition and requires a home safety vault or a bank locker which involves associated hassles. Transporting gold or wearing gold jewellery is not risk-free either and the risk of theft is always there. On the other hand, investing in a Gold ETF offers peace of mind as it remains safe in your Demat account and you can enjoy the appreciation in value over time.

Diversification of portfolio
– Gold is an asset class that is not very volatile and can be a safe haven in a crisis. It gives you an additional option beyond debt and equity that offers appreciation over time. You can consider allocating 5-10% of your total portfolio to Gold ETF.

Loan collateral – To get a secured loan at cheaper rates, you will need to provide collateral. You can use your investment in Gold ETF as a security to obtain loans on better terms.

A Gold ETF is a good choice as it helps you benefit from the potential appreciation of gold in a safe and convenient manner. Make sure you check out the various Gold ETFs available in the market and opt for one that has the potential to offer you potential returns. Gold ETFs fit investors who desire gold exposure and market participation.

An investor education initiative by ICICI Prudential Mutual Fund

Visit to know more about the process to complete a one-time Know Your Customer (KYC) requirement to invest in Mutual Funds. Investors should only deal with registered Mutual Funds, details of which can be verified on the SEBI website For any queries, complaints & grievance redressal, investors may reach out to the AMCs and/or Investor Relations Officers. Additionally, investors may also lodge complaints on if they are unsatisfied with the resolutions given by AMCs. SCORES portal facilitates you to lodge your complaint online with SEBI and subsequently view its status.

Mutual fund investments are subject to market risks, read all scheme related documents carefully.

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