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Gold ETF – Exchange Traded Fund – What is and How to ?

Marketlive.in brings in Stock Market tutorials explaining the Gold Exchange Traded Funds(ETF). The tutorial explains in simple terms how exactly Gold ETFs work and how one can invest in a Gold ETF.



What is an ETF ?

What is a Gold ETF ?

What is the advantage of Gold ETF ?

What does the price of 1 unit signify ?

How to buy and sell Gold ETF?


 

What is a Gold ETF ?

See Also: What is an ETF ?

A Gold ETF is an exchange traded fund, having the underlying asset as Gold. Thus the Gold ETF represents physical gold which may be in paper or in the dematerialised form. The advantage here is that the buyer of a Gold ETF doesn’t have to deal with the delivery of physical gold, but still can buy and sell it in the Stock market.

Not all the Gold ETFs have purely gold as their sole asset. In most of the cases, apart from having gold as a major asset, these funds might also have some Debt instruments and Cash as an asset. The proportion and the holding of these assets varies from every fund to the other.

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What is the advantage of Gold ETF ?

There are many advantages of investing in a Gold ETF rather than investing in Physical Gold. ETFs provide a completely transparent and convenient way of trading in gold for the investors. They provide a hassle free way of trading the yellow metal without incurring the costs associated in other forms of gold trade.

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What does the price of 1 unit signify ?

Theoretically, each unit of the Gold ETF represents 1 gram of gold. As the price of Gold increases or decreases, the unit price of the Gold ETF also fluctuates accordingly.

However the fund might also have other types of assets other than gold, as described in the previous section. Thus the prices of the Gold ETF units will vary from fund to fund.

Another major contributor to the variation of the unit prices, is the Expense Ratio for the fund. The operating expenses for every fund will vary widely. This factor will also affect the unit price of a Gold ETF.

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How to buy and sell Gold ETF?

As with any other stock that is listed on the Stock exchange, Gold ETFs can also be bought or sold during the market hours of the exchange. Using the same mechanism for buying stocks, Gold ETFs can be bought and sold from the Stock Market.

Once purchased, the units of Gold ETFs will also be stored in the dematerialized form in your Demat account. You can sell it from this account, very similar to selling a stock.

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Watch live prices of Gold ETFs traded in NSE


 

 

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