Amid gold rally, should you buy gold ETFs over physical variant? 5 key advantages explained | Mint

Gold prices have been rising quite fast in the past few weeks. Gold prices stand at ₹86,793 per 10 grams (24 carats) and at ₹79,573 (22 carats).

Although the price witnessed biggest weekly drop of 2.5 percent after eight weeks of gains last week, but it still remains higher by 2.2 percent for February.

Investing in this precious metal is considered safe when the market is volatile. Additionally, when seen through the lens of investing, digital gold and ETFs are considered better than physical gold which some even refer to as consumption.

“When you want to make the most of gold investment, the only way to do it is by investing digitally. Physical gold involves additional cost such as making and storage cost, which reduce the return on growth,” says Sridaran Sundaram, a Sebi-registered investment advisor and founder of Wealth Ladder Direct.

Therefore, it is advisable to invest in gold ETFs over physical gold.

For the uninitiated, gold ETF is a fund that allows investors to trade gold on a stock exchange. The value of a gold ETF is linked to the price of gold. These are the key advantages of investing in a gold ETF.

Gold ETFs: These are the 5 key advantages

1. Easily tradeable: Since these are exchange traded funds (ETFs), they are easily tradeable. And you can buy or sell easily in the stock markets, thereby maximising the gains by selling them in the open market as soon as you want to liquidate them.

Conversely, if the prices are trading lower and you intend to buy the units of ETFs at that price, you can buy them instantly via your demat account

2. No storage cost: Unlike physical gold, exchange traded units have no storage cost. Since the ETFs are linked to your demat account, you can put your profit in your bank instead of losing a regular income to a bank locker which could be around ₹5-7,000 per annum against a fixed deposit.

3. No making cost: When you buy digital gold in form of ETF, you do not have to worry over the making cost of gold jewellery. Typically, making cost of gold ornaments can be as high as 15-20 percent.

4. Smaller units: You can invest in gold ETF is smaller denominations. When one gram of physical gold costs around ₹8,600, ETF enables investors to buy digital gold in very small denominations such as ₹500-1,000.

5. Trasparency: It’s extremely straight forward to monitor the price of gold, which allows you to examine the performance of your investment in ETFs.

Visit here for more personal finance updates.