Gold etf
This query is : Resolved
29 November 2013
Dear Rohit,
A gold etf refers to an exchange trading fund with underlying asset as gold. These funds track gold prices. Most of the Indian gold ETF are linked with pricing of London Bullion Market Association.
This product allows investors to reap benefit of appreciation of gold value without risking physical storage and bulk buying requirements. In gold etf you can invest in very small quantities thus opening doors to small investors.
"Benefits: Gold ETFs provide an opportunity to investors to accumulate gold over a given period of time. Since it can be purchased in small quantities, one can plan the procurement as per future requirements, say, for the marriage of children, etc.
Moreover, there is no risk of theft and one need not worry about the storage cost (as in case of physical gold) because such units are held in demat or paper form. In the case of physical gold, one ends up paying extra for making charges as well, but there is no extra charge applicable in gold ETFs. When needed, one can exchange them in multiples of 1 kg units of 0.995 purity.
Besides, unlike gold coins and bars, for which most jewellers offer only an exchange and not a buyback, gold ETFs can be sold at transparent prices across India. Even in terms of taxation benefits, gold ETFs are way ahead of the physical gold. No sales tax, VAT or securities transaction tax is applicable on gold ETFs. As units of such funds are traded like stocks on the exchange, it is eligible for the long-term capital gains after one year, unlike physical gold, which is eligible for long-term capital gains after three years. Besides, unlike physical gold, investors don't have to pay wealth tax on gold ETFs.
Drawbacks: Most of the above-mentioned advantages come at a cost in the case of gold ETFs. A small asset management fee is charged by the fund house, so the return is slightly less than the actual increase in the gold price. Moreover, there are additional costs involved at the time of buying and selling in the form of brokerage or commission. Another drawback with gold ETFs is liquidity; some ETFs are illiquid, which impacts their buying and selling flexibility. Hence, investors should consider this as a factor while investing in gold ETFs and should stick to funds that are liquid." (Source: ET)
Also remember that unlike equity shares gold ETF doesnt get LTCG exemption.
A gold etf refers to an exchange trading fund with underlying asset as gold. These funds track gold prices. Most of the Indian gold ETF are linked with pricing of London Bullion Market Association.
This product allows investors to reap benefit of appreciation of gold value without risking physical storage and bulk buying requirements. In gold etf you can invest in very small quantities thus opening doors to small investors.
"Benefits: Gold ETFs provide an opportunity to investors to accumulate gold over a given period of time. Since it can be purchased in small quantities, one can plan the procurement as per future requirements, say, for the marriage of children, etc.
Moreover, there is no risk of theft and one need not worry about the storage cost (as in case of physical gold) because such units are held in demat or paper form. In the case of physical gold, one ends up paying extra for making charges as well, but there is no extra charge applicable in gold ETFs. When needed, one can exchange them in multiples of 1 kg units of 0.995 purity.
Besides, unlike gold coins and bars, for which most jewellers offer only an exchange and not a buyback, gold ETFs can be sold at transparent prices across India. Even in terms of taxation benefits, gold ETFs are way ahead of the physical gold. No sales tax, VAT or securities transaction tax is applicable on gold ETFs. As units of such funds are traded like stocks on the exchange, it is eligible for the long-term capital gains after one year, unlike physical gold, which is eligible for long-term capital gains after three years. Besides, unlike physical gold, investors don't have to pay wealth tax on gold ETFs.
Drawbacks: Most of the above-mentioned advantages come at a cost in the case of gold ETFs. A small asset management fee is charged by the fund house, so the return is slightly less than the actual increase in the gold price. Moreover, there are additional costs involved at the time of buying and selling in the form of brokerage or commission. Another drawback with gold ETFs is liquidity; some ETFs are illiquid, which impacts their buying and selling flexibility. Hence, investors should consider this as a factor while investing in gold ETFs and should stick to funds that are liquid." (Source: ET)
Also remember that unlike equity shares gold ETF doesnt get LTCG exemption.
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