Gold ETFs: Should You Invest In Them?

Compared to actual gold investments, gold ETFs are known to be less expensive and give an investor the flexibility to buy as little as one unit of gold.

Industry experts say investors are looking to invest in gold ETFs because purchases are made electronically and investors do not have to worry about gold storage and security. Thus, the investor is protected from the hassle of conservation and security and the concern of gold purity.

Who should invest in Gold ETF?

“All investors should allocate Gold ETFs as part of a good portfolio building process,” said Chintan Hariya, Head of Product Development and Strategy, ICICI Prudential AMC.

On a case-by-case basis, experts say, investors can invest in a monetary or statistical way through a systematic investment plan (SIP). Gold ETFs allow an investor to buy as little as one unit (1/1000 g ~ 50 rupees per unit).

Advantages of buying gold ETFs

Gold ETFs offer some unique benefits. Since ETFs are kept electronically in a demat account, an investor can be comfortable with things like security, savings and gold purity.

Hariya explains, “An investor can buy or sell Gold ETF units through a trading account just like equity shares on the exchange during market hours.”

He added, “Multiple investment of 1 unit (approximately Rs. 50) allows every investor to participate in Gold ETFs and makes it easy to deposit units in a timely manner.”

Due to the low cost of acquiring Gold ETFs and the absence of other related costs.

Tax treatment of Gold ETF

Gold ETFs are a tax-efficient way of owning gold because earnings from Gold ETFs are treated as capital gains, short-term or long-term, depending on the holding time.

“Long-term capital gains (over 3 years) are subject to 20 per cent tax with indexation benefits when short-term capital gains are added to your income and taxed according to the investor’s tax slab rate,” Hariya added.