Earlier investment in Gold is a dream for many individuals because of its high prices. But with time, Gold ETFs were introduced, which can be an economical option for an investor to invest in Gold and get the benefit of appreciation in physical Gold Price.
In today’s blog post, we will give you an overview of the Gold ETF, along with the key factors to consider before investing in it.
Meaning of Gold ETFs
A Gold exchange-traded fund, or Gold ETF, is a kind of investment vehicle that tracks the price of actual Gold and can be bought and sold on a stock exchange like any other stock. The fund manager of the ETF purchases the physical Gold on your behalf, and by purchasing the units of the Gold ETF, you actually become the owner of one unit of physical Gold it represents. The value of a Gold ETF fluctuates with the price of Gold. Generally, each unit of a Gold ETF usually represents 1 gram of Gold, Also an ETF is a basket of Securities that includes Stocks, bonds & Commodities.
Key Features of Gold ETF
The key features of Gold ETF are as follows:
- Physical Gold: Each unit of Gold ETF represents the ownership equal to one gram of 99.5% pure Gold.
- Convenience: Gold ETFs can be purchased or sold on the stock exchange using your demat account, just like shares.
- Transparency: A Gold ETF’s price fluctuates in accordance with the Gold market price.
- No Storage Cost: You don’t require a locker or have to worry about theft because units of Gold ETFs are electronically stored.
Best Gold ETFs in India 2025
The best Gold ETFs in India 2025 are mentioned in the table below based on the past one-year returns:
| Scheme Name | AUM (Crore) | Expense Ratio (%) | 6 Months | 1 Year | 3 Years | 5 Years |
|---|---|---|---|---|---|---|
| UTI Gold ETF | 2,156.36 | 0.48 | 26.39 | 48.64 | 30.00 | 15.03 |
| LIC MF Gold Exchange Traded Fund | 526.96 | 0.41 | 23.98 | 47.39 | 30.14 | 15.48 |
| ICICI Pru Gold ETF | 8770.32 | 0.5 | 25.14 | 49.15 | 29.70 | 15.16 |
| ABSL Gold ETF | 1253.31 | 0.47 | 24.59 | 49.10 | 29.62 | 15.14 |
| Axis Gold ETF | 2083.89 | 0.56 | 24.96 | 49.01 | 29.64 | 15.20 |
| Mirae Asset Gold ETF | 952.37 | 0.31 | 25.09 | 48.86 | – | – |
| Kotak Gold ETF | 8315.38 | 0.55 | 23.20 | 48.90 | 29.61 | 15.10 |
| SBI Gold ETF | 9505.83 | 0.70 | 22.50 | 48.84 | 29.47 | 14.28 |
| Nippon India ETF Gold BeES | 23832.47 | 0.80 | 22.56 | 48.72 | 29.48 | 14.90 |
| Baroda BNP Paribas Gold ETF | 199.87 | 0.59 | 24.35 | 48.60 | – | – |
| Edelweiss Gold ETF | 293.98 | 0.66 | 22.82 | 48.45 | – | – |
| Invesco India Gold ETF | 315.71 | 0.55 | 25.29 | 48.31 | 29.75 | 15.21 |
| HDFC Gold ETF | 11378.56 | 0.59 | 23.41 | 48.45 | 29.60 | 15.08 |
How do Gold ETFs work
When you purchase the Gold ETF on the stock exchange, you are actually purchasing the unit of physical Gold it represents. The fund manager appointed by the Asset Management Company on your behalf purchases the physical Gold having 99.5% purity. And the performance of an ETF depends on the price of physical Gold. If the price of Gold moves upside then the value of your ETF investment also goes up, and vice-versa.
Read Also: How to Invest in Gold ETF
Benefits of Investing in Gold ETF
The key benefits of investing in Gold ETF are as follows:
- Safe: When you purchase a Gold ETF, you don’t have to worry about keeping physical Gold safe in lockers or paying any storage fees.
- Liquidity: You can easily sell the units of the Gold ETF on the stock exchange during trading hours and liquidate your investment.
- Purity: Investors need not worry about the purity of Gold, as the fund manager invests the amount in 99.5% pure physical Gold.
- Transparent Pricing: The prices of Gold ETFs change according to the price of physical Gold in the market.
- Diversification: One can easily diversify their investment portfolio in Gold through a Gold ETF.
Factors to Consider Before Investing in Gold Investing
The key factors to consider before investing in Gold are as follows:
- Risk Tolerance: One must consider their risk appetite before investing in a Gold ETF, as the price of a Gold ETF depends on the price of physical Gold.
- Gold Price Trend: The Gold price fluctuates based on various national and international factors. Hence, one should keep an eye on the Gold price trend.
- Investment Objective: One should consider its investment objective, such as whether they are investing in a Gold ETF for long-term wealth creation or short-term trading, before investing in a Gold ETF.
- Fund House: The fund house’s reputation needs to be checked before investing in Gold ETFs.
- Expense Ratio: An investor should opt for investing in a Gold ETF of an AMC which has a lower expense ratio.
- Tracking Error: Tracking error plays a vital role in analysing the performance of passively managed funds such as Gold ETFs. Therefore, one should invest in a Gold ETF which has the least tracking error.
Who Should Invest in Gold ETFs
Gold ETFs can be considered as an investment option by the following investors:
- Portfolio Diversification: One who is looking to diversify their investment portfolio can opt for investment in a Gold ETF.
- Risk-Averse Investor: Investors who do not wish to take risks in their portfolio can consider investing in a Gold ETF. Gold is considered a haven during economic downturns.
- Cost-Effective Option: Investors who are looking for a cost-effective investment option for investment in Gold can consider investing in a Gold ETF. As it has the lowest management charges.
- Investor Looking for Liquidity: Investors who are looking for liquidity in their Gold investment can invest in a Gold ETF, as it can be easily sold on the stock exchange during trading hours.
Read Also: Gold Investment: How to Invest in Gold in India?
Conclusion
On a concluding note, Gold ETFs provide an opportunity to diversify your investment portfolio and get the benefit of Gold price appreciation. Gold ETF also provides liquidity, and it can be easily traded on the stock exchange. However, tracking error can impact the performance of Gold ETFs, also their prices fluctuate based on the physical Gold, hence can show volatility in the portfolio. Therefore, it is advisable to consult your investment advisor before making any investment decision in a Gold ETF.
| S.NO. | Check Out These Interesting Posts You Might Enjoy! |
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| 1 | A Guide To Investing In Gold In India |
| 2 | Gold ETF vs Gold Mutual Fund: Differences and Similarities |
| 3 | Best Gold Stocks in India 2025 |
| 4 | Top 10 Reasons to Invest in Gold |
| 5 | Best Silver Stocks in India |
Frequently Asked Questions (FAQs)
What is a Gold ETF?
A Gold ETF is an investment product offered by an asset management company which is traded on the stock exchange. The performance of the Gold ETF depends on the physical price of Gold. Each unit purchased by an investor represents the ownership of 1 gram of Gold.
Does the Gold ETF provide dividends to its investors?
No, Gold ETF do not provide dividends to their investors. The returns from investment in Gold ETFs come only in the form of capital appreciation.
Is it mandatory to have a demat account for investing in ETFs?
Yes, one should have a demat and trading account for investing in ETFs.
What are the factors that impact the performance of Gold ETFs?
Various factors impact the performance of the Gold ETF are International price of Gold, inflation, Geopolitical uncertainties, etc.
Is there any possibility of tracking error in the Gold ETF?
Yes, as a Gold ETF is a passive fund, therefore, like any other index fund it can also have a tracking error.
