InvestorQ : What is the difference between gold ETFs and physical gold and why the very low trading ETFs in the present market as compared gold commodities market?
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What is the difference between gold ETFs and physical gold and why the very low trading ETFs in the present market as compared gold commodities market?

Answer
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natasha Samani answered.
3 months ago


Gold ETFs are units representing physical gold which is either on paper or in dematerialized form. It is Exchange- traded-fund that aims to track the price of physical gold. These are in the nature of passive investment instruments based on the prices of gold and thus invest in gold bullion. This investment is suitable for those who are looking to diversify their portfolio with exposure to the gold market. The risk involved is less and one does not have to be always worried about the safety of their gold kept in cupboard or locker of the house. So, there is no storage cost as compared to physical gold. 

These are the features of gold ETFs:

  • Gold ETFs offer great liquidity to the investor as they can buy/sell it at any time of need. Also, expenses involved in making any transaction are less than that of physical gold.
  • These can be purchased online and easily be placed in your De-mat account. The Asset Management Company (AMC) shall be responsible for keeping them and managing them throughout the period of holding. However, in nature, they are similar to physical gold.
  • The value of gold ETFs goes up or down in line with the prices of gold over stock exchanges.
As you can see, Gold ETFs are more like physical gold but in the dematerialized form. It can be traded just like stocks over any stock exchange, unlike physical gold for which you need to visit a gold retailer. You do not need to pay any making charges over ETFs unlike physical gold, where to keep the gold with them people generally choose converting it into ornaments. 

Gold ETFs have become one popular form of investment among conservative investors. However, considering the current pandemic situation there has been a massive downfall in these kinds of investments as investors are little cautious to step in the gold market. The gold chart has headed upward soon after the coronavirus outbreak which is making investors a little obnoxious towards the market, there’s less certainty in the gold market for now.