Looking to invest in a safe haven asset? Know how Gold ETF can be the answer

Gold ETFs are passive investment instruments.

The current environment leading to uncertainties has thrown many investors into a jittery mode. However, the recent rally in gold prices has sparked a ray of hope and several investors have gone into embracing gold as a major chunk of their portfolio.

Infact, experts in a webinar on 'Gold Investment Opportunity and Price Outlook' organised by the PHD Chamber of Commerce and Industry (PHDCCI) this week had said that the yellow metal is expected to have a good run in the coming times as demand will emerge, and it should be seen as part of portfolio diversifier.

But how does one invest in Gold --buy physical gold or invest in Gold ETF? Let’s have a look at the pros and cons of both.

What are Gold ETFs?

Gold ETFs (Exchange Traded Fund) are passive investment instruments that are based on price movements and investments in physical gold. Gold ETFs are exchange traded funds of gold and a person can hold units of gold in demat form in more cost effective manner. The funds also offer liquidity on stock exchanges.

How is it different from physical gold?

The gold ETFs track gold prices and each unit of these ETFs is generally calculated at the rate of one gram of the metal. It carries advantage like 99.5 percent purity assurance over physical gold.

What are the benefits of gold ETFs?

The market participants say that gold ETFs offer many benefits over the physical gold, such as lower costs, greater transparency, purchase in small units and an easier exit.

How can you invest in Gold ETFs?

You will have to open a Demat account and an online trading account to invest in Gold ETFs. Your PAN Card details, address proof and identity proof details would be required for this. After all the protocols have been followed, your Demat account will be ready and you can choose a Gold ETF and place your order.

Is physical buying of gold still a better option over ETF?

This solely depends upon the situation, need and funds available for investment. Traditionally still in India, physical jewellery are chosen for marriages and festivals.

However, for the short to medium term investment purpose, ETFs are useful option since they provide good liquidity. It also provides and easy entry and exit to the investors.