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E-Gold V/s Gold ETF: Which is better way to invest in gold?

 

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Question:

What is the difference between Gold ETFs and e-Gold? Which is the best way to invest. I am a beginner to the investments

Answer:

Dear Bhaskar,

  

Investors can invest in gold through ETFs as well through e-gold of national spot exchange.There are some minor differences in ETF and e-gold.

  • Fund managers track gold prices through Net Asset Value (NAV).NAV of Gold ETF is net of liabilities so NAV and returns of different ETFs are different.
  • While in NSEL e-gold investors directly tracks gold prices.
  • NAV of ETFs are inclusive of custodian charges.while NSEL do not charge any holding charges.
  • In e-gold ,investors are directly holding the gold units ,,,while in Gold ETFs gold is actually owned by mutual fund AMCs.
  • Physical delivery in small denominations is possible in e-gold.while in gold ETFs physical delivery depends on  sole discretion of ETFs.
  • ETFs may offer delivery for investors holding Gold of  higher amount.
  • We can invest in gold ETF only up to 3:30 PM IST as market get closed.while spot market is open till midnight and we can invest in e-gold series till 11:30 PM.Suppose if gold ETF closed  with NAV of 2300 (Time : 3:30 pm) and get closed at e-gold at 2330(At 11:30 pm).Then there is a difference of Rs.30 per gram in both the prices.Gold ETF will try to cover up this difference on opening itself.Investors will not get opportunity to get the price in between.
  • In both cases,buy-sell intraday/delivery brokerages are payable which are in general in the range of 0.3 to 1%.
  • E-gold will be taxed like a Physical gold while Gold ETFs are taxed as Non equity mutual fund

From above, we can observe that E-gold has got edge over Gold  ETF. So, it is recommended to to invest in gold via E-gold. For more information click Here 

            

(You can open a free account with us where you can transact mutual funds online at free of cost.To know more Click Here)

           

Cheers,
The Yogi

Published Aug 10 2011




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