Gold ETF

Full form: Gold Exchange Traded Fund

Investments

A Gold ETF is an exchange-traded fund tracking gold bullion. Each unit represents 1 gram of 99.5% pure gold. Gold ETFs allow gold price exposure without physically holding gold -- no storage, no making charges, no purity concerns.

In detail

Gold ETFs are listed on BSE and NSE and can be bought and sold like shares. They require a demat account. Returns come only from gold price appreciation (no dividend or interest).nnComparison: Sovereign Gold Bonds (SGB) are better than Gold ETFs for investment purposes -- SGB gives 2.5% additional annual interest plus zero capital gains tax at 8-year maturity. Gold ETF is better for shorter horizons or when you need flexibility to exit at any time.

Formula

Gold ETF price approximately = Current gold spot price per gram LTCG: gains after 24 months taxed at 12.5% STCG: gains under 24 months taxed at income slab rate Gold 10-year CAGR (2014-2024): approximately 10-12%

Real-life example

🇮🇳 India example

Ananya buys 10 units of a Gold ETF at Rs 5,800/unit (Rs 58,000 total). Gold rises 30% over 3 years. NAV is now Rs 7,540. Investment worth Rs 75,400. Gain = Rs 17,400. Held over 24 months so LTCG at 12.5% = Rs 2,175 tax. Net profit = Rs 15,225.

Frequently asked questions

Gold ETF vs SGB -- which is better? ▼

SGB is better for long-term investment (5-8+ years): gold price returns PLUS 2.5% annual interest PLUS zero capital gains tax at maturity. Gold ETF is better for shorter horizons or if you need flexibility to exit anytime. For most investors building long-term gold allocation, SGB is the superior choice.