InvestorQ : When I am holding gold ETFs, is my risk the same as holding a stock?
Dhwani Mehta made post

When I am holding gold ETFs, is my risk the same as holding a stock?

Answer
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Khushi Patel answered.
1 year ago


The answer is yes and no. It is yes because just as stocks have price risk, gold also has price risk. However, gold has traditionally never been as volatile as individual stocks. There is a price risk in gold ETFs just as there is price risk in gold. If the price of gold goes up then the price of the gold ETF also goes up and vice versa. There is no other factor that impacts the price of Gold ETF other than the price of physical gold. The largest gold ETF in India, GOLDBEES, operates at a fraction of 1 gram of gold.

The most important thing you need to understand, and the reason it becomes valuable, is that gold ETFs tend to perform very well in times of global and domestic uncertainty. This is something that you will get to see time and again. Gold prices tend to increase in times of economic and geopolitical uncertainty. Through the seventies when the world was rocked by wars, the price of gold shot up almost 25 times. Post the Lehman crisis, the price of gold continued to go up till September 2011 when it finally topped out. Gold is a good hedge in times of elevated global uncertainty.