Definition
Gold ETF
A Gold ETF is an exchange-traded fund that tracks the price of physical gold, letting investors buy and sell gold exposure on the stock exchange in demat form.
A Gold ETF holds physical gold of high purity and issues units that trade on the exchange, each broadly representing a small quantity of gold. You buy and sell units like shares through your demat account, gaining gold-price exposure without storage hassles.
Unlike SGBs, Gold ETFs do not pay interest and involve a small annual expense ratio, but they offer easy liquidity during market hours and no lock-in. There is no making charge or purity worry as with physical gold.
Gold ETFs suit investors wanting flexible, liquid gold exposure; SGBs suit those prioritising interest income and tax efficiency for long holds. Both avoid the drawbacks of physical gold.
Related terms
- Digital Gold vs SGBDigital gold is online-bought, vault-stored physical gold, while a Sovereign Gold Bond is a government security tracking gold's price that also pays interest; they differ sharply in risk and tax.
- SmallcaseA smallcase is a ready-made basket of stocks or ETFs built around a theme or strategy that investors can buy in one click through their broker, holding the securities directly.
- Sovereign Gold Bond (SGB)A Sovereign Gold Bond is a government security denominated in grams of gold, issued by the RBI, that tracks gold prices and pays a fixed rate of interest on the invested amount.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.