Gold-backed ETFs are listed and traded on the National Stock Exchange of India (NSE) and Bombay Stock Exchange Ltd. (BSE) (“the Stock Exchange”). They trade like a company’s stock listed on the Stock Exchange. You can buy and sell gold ETFs just as you would trade in stocks. When you sell your units in a gold-backed ETF, you don’t get physical gold but cash.
Trading of units of gold-backed ETFs takes place through a dematerialised account (Demat) and a broker, which makes it extremely convenient to buy and sell units of these ETFs electronically.
There is less worry about gold purity than in other contexts as these funds claim to be backed by gold with 99.5% purity. Gold-backed ETF prices are listed on the NSE website and can be bought or sold through the broker when trading occurs on the Stock Exchange. It is important to note that unlike jewellery, gold-backed ETF units can be bought and sold at the same price Pan-India.
Gold-backed ETFs can be bought at the stock exchange through a broker using a Demat account and trading account. A brokerage fee and fund management charges are also levied when you buy and sell these gold-backed ETF units.
Since gold-backed ETFs are traded on the Stock Exchange, they are a very convenient tool to invest in and make for a desirable variation to your investment portfolio. An investor in gold faces several different kinds of risks. The Securities Exchange Board of India (SEBI) monitors trading on the Stock Exchange, which may help to manage certain risks in buying and selling units of gold-backed ETFs. Regular auditing of the gold bought by gold-backed ETFs is also conducted by government agencies.
If you are someone who doesn’t want to invest in physical gold due to the storage hassles and are also looking to get tax benefits then you may want to consider units in gold-backed ETFs. Moreover, it is very easy to buy and sell gold-backed ETF units at the click of a button.
Important features of gold-backed ETF investment
Gold-backed ETFs can be sold on the Stock Exchange through the broker using a Demat account and trading account. Even though you are investing in an ETF that is backed by physical gold, remember that these ETFs are best used as a tool to benefit from the price of gold rather than to get access to physical gold. So, when you sell units in gold-backed ETFs, you are paid in rupees. Asset Management Companies may permit you to redeem your ETF units in the form of physical gold if you hold a total number of units that equate to a backing of 1kg of gold, or multiples thereof.
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