Gold ETF stands for gold exchange traded funds and these funds aim to track the price of Gold.Gold ETF are traded in stock exchange like usual stocks and generally 1 unit of Gold ETF represents one gm of Gold.
Owning the units of Gold ETF is almost same as holding that amount of actual gold.So If you have 10 units of Gold ETF,that is same as holding 10 gms of gold with you.
There are various advantages associated with holding gold ETF instead of actual gold.
- Its Virtual – In case of gold ETF the gold is held virtually in your Demat account and you do not have to worry about it being stolen or lost.
- Its Pure – There is no risk of getting cheated and being sold impure gold unlike the case with actual gold.If you are holding 10 units of gold ETF,that is same as owning 10 gms (depends on your Fund) of actual gold with 99.5% purity.Gold ETF only deal in gold bars with 99.5% purity.Infact you do not even have to think about the purity of gold.
- You can sell any time – If you want to sell the actual gold you might need to search for someone who can buy it(Jewellers,Brokers).However Gold ETF are very liquid and can be sold in the stock market at any time.
- You can sell at the market Price -With actual gold you do not get the market price from the buyer and is usually 10 to 20 percent less than the market price.Gold ETF when sold in the stock market will fetch you the current market price.
- You can buy the smallest unit -It may not be possible or practical to buy 1 gm of gold but with the Gold ETF you can even buy the smallest one unit (1 Unit equivalent to 1 gm of gold)
So as you can see,we clearly have Gold ETF as winner here.Due to these advantages Gold ETF is gaining popularity as an investment option now a days.