6 things to note when investing in gold ETFs


oi-Roshni Agarwal


Right now, as gold prices have been lowered due to the hawkish stance of the Federal Reserve and the dollar’s resilience because of it, investing in gold ETFs can be a good idea. idea of ​​the yellow metal right now.

6 things to note when investing in gold ETFs

This is because gold is still a good long term investment which is considered a safe haven as well as a hedge against inflation. Additionally, according to experts in the field, gold could experience a pullback for some time before moving north again.

Now, why gold ETFs?

Paper investment or financial investment in gold instead of regular physical investment always bodes well for investors as there is no risk such as purity, storage risk etc. . . Additionally, for investors, there are no entry or exit charges for Gold ETFs.

Tips to note when investing in gold ETFs

1. Gold ETFs can be traded like stocks and therefore offer high liquidity:

In case of need, the investor does not have to panic at the prospect of their money being stuck in gold ETFs, as they can be easily liquidated due to their stock exchange listing. In addition, there is no output charge.

2. Gold ETFs must be kept in the mat account:

For Gold ETFs, the investor must have a mat account as they are held in a mat account. Moreover, to execute trades on them, they can be done through the investor’s trading account.

3. For gold ETFs, buying and selling have no impact on their assets under management:
Unlike regular mutual funds, in which investors who buy or sell them increase or decrease the funds’ assets under management, this does not happen for gold ETFs. In the case of the Gold ETF, only title or ownership is transferred from one person to another.

4. Gold ETFs regulated by SEBI and whose underlying is gold which is maintained by the depositary:

Gold ETFs have gold as an underlying asset. Usually gold ETFs keep their physical gold with the Bank of Nova Scotia.

5. Gold ETFs are exposed to price risk:

The only risk that gold ETFs face is that of the price, for example when the price of gold goes down, the value of the gold ETF goes down in the same proportion.

6. Taxation of Gold ETFs:

Being treated as a non-participation, for short-term gains, the holding period of 3 years and less is considered. LTCGs are taxed at 20% after benefiting from the benefit of indexation. In addition, these gold ETFs are not subject to the STT or the tax on securities transactions.

Overall, unlike other investments, investing in gold is also a hedge that protects the value of your other investments in uncertain times when other investments fail.


Article first published: Thursday July 1st, 2021, 2:01 PM [IST]

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