Gold ETF
Topic: Financial Markets, Instruments, Insurance and Pensions · NCERT: Beyond NCERT
Meaning
A Gold ETF (Exchange-Traded Fund) is a fund that holds physical gold. It lets you own gold electronically. Its units are listed on a stock exchange, so you buy and sell them through a demat account (an account that holds securities electronically), just like shares. India has had Gold ETFs since 2007. They are part of the shift in household savings away from physical gold and into financial assets.
Example
A family wants to save in gold for a wedding ten years away. Instead of buying jewellery or coins, they buy Gold ETF units every month. They avoid making charges, storage worries and purity risk, and they can sell on the exchange on any trading day.
Don't confuse with
- Sovereign Gold Bond (SGB): a government security in grams of gold (launched November 2015) that also pays 2.5% a year interest and has an 8-year tenure. A Gold ETF pays no interest but is easier to sell quickly. No fresh SGB tranche has been issued since February 2024.
- Physical gold: carries storage, making-charge and purity risks, which a Gold ETF removes.
Related concepts
- Mutual fund
- Net Asset Value
- Systematic Investment Plan
- Index fund
- Exchange-Traded Fund
- Fund of funds
- Real Estate Investment Trust
- Infrastructure Investment Trust
- Domestic institutional investors
- Participatory notes