INVESTMENT OPTION: GOLD ETF
Vs
PHYSICAL GOLD
What is Gold
ETFs?
For a
non-physical form of Gold Investment, gold ETFs are a popular choice.
·
Gold ETFs (Exchange Traded Fund) listed schemes that invest in underlying gold bullion.
·
These are listed and traded on
major stock exchanges. It holds gold ETFs in electronic form, where one unit is
equal to one gram of gold.
Benefits of
Investing in Gold ETFs:
·
Purity: The underlying gold is 99.5% pure. Benefits of Investing in Gold
ETFs Purity: One of the biggest benefits of investing in Gold ETFs is that the
purity is constant. Since each unit is backed by the price of pure gold, there
is no risk to purity.
·
Efficiency: Another advantage of Investing in Gold ETFs is that it is cost
efficient. There is no premium like making charges attached to it. One can buy
at the International rate without any mark-up.
·
No risk to safety: Since the units of Gold ETFs are in the Demat account of the
holder, there is no risk of theft.
·
Low investment amount: With one share equal to one gram of gold, one can purchase in
small quantities. Investors can buy and accumulate gold by making small
investments over a period of time.
·
Collateral: ETFs are accepted as collateral for loans.
How to sell or redeem Gold ETF?
Gold ETFs can be sold at the stock exchange through the broker using a demat
account and trading account. Since one is investing in an ETF that is backed by
physical gold, ETFs are best used as a tool to benefit from the price of gold
rather than to get access to physical gold.
So, when one liquidates Gold ETF units, they
are paid as per the domestic market price of the gold. AMCs also permit
redemption of Gold ETF Units in the form of physical gold in ‘Creation Unit’
size, if one holds equivalent of 1kg of gold in ETFs, or in multiples thereof.
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