GOLD

Gold Exchanges Traded Fund

Gold Savings Fund is a new concept of investing in gold as it allows you to invest in gold without a demat account. These funds are Fund of Fund & it endeavors to near the returns of Gold Exchange Traded Fund which in turn invests in physical gold. But unlike a ETF the fund does not require a demat account and the stock market route for buying and selling the units.

These funds are passively managed fund suitable for a long term investors, who can invest through SIP or lump sum. As a long term investment it gives an opportunity to invest in the GOLD commodity, in a convenient way, which is one of the fancied assets for any investor.

Features & Benefits of Gold Savings Fund

1. No need for having demat account: so no need to open a demat account and pay the annual maintenance charges.
2. Systematic Investment Plan (SIP): Benefit your investment by investing through small amount over a period of time.
3. Easy to Invest & Liquidate: similar to investing in a mutual fund scheme.
4. Purity & Safety: investment is in highest quality gold with without

Currently two options are available in market:

1. Kotak Gold Savings fund
2. Reliance Gold Savings Fund

Why should an investor invest in Gold ETF?

No worry on adulteration
Gold provides diversification to the portfolio
Gold is considered as a Global Asset Class
Gold is used as a Hedge against Inflation
Gold is considered to be less volatile compared to equities
Held in Electronic Form
Store of value
Extremely Liquid

Advantages of Investing in Gold ETFs

Potentially cheaper to have price exposure to gold price as compared to other available avenues
Quick and convenient dealing through demat account
No storage and security issue for investors
Transparent pricing
Taxation of Mutual Fund
Can be traded on stock exchange like buying / selling a stock
Ideal for retail investor as minimum lot size to trade is one unit on secondary market

NAV of a unit will track price of approximately ½ or 1 gram of gold

Comparison of Gold ETF with Physical Gold

S No	Parameter	Jeweller	Bank
1	How Gold is held	Physical(Bars / Coins)	Physical(Bars / Coins)
2	Pricing	Differs from one to another. Neither transparent nor standard.	Differs from bank to bank. Not Standard.
3	Buying Premium above gold price	Likely to be more	Likely to be more
4	Making Charges	Charges are incurred	Charges are incurred
5	Impurity Risk	High	Nil
6	Storage Requirement	Locker / Safe	Locker / Safe
7	Security of Asset	Investor is responsible	Investor is responsible
8	Resale	Conditional and uneconomical	Banks do not buy back
9	Convenience in Buying / Selling	Less convenient, as Gold needs to be moved physically	Less convenient, as Gold needs to be moved physically
10	Quantity to Buy / Sell	Available in standard denomination	Available in standard denomination
11	Bid Ask Spread	Very High	Can’t Sell Back
12	Risk of Theft	Yes, possible	Yes, possible
13	Wealth Tax	Yes	Yes
14	Long Term Capital Gains Tax	Only after 3 years	Only after 3 years

Investor Requirements for trading in Gold ETF

Trading account with a stock exchange broker
Demat account as Gold ETF can be traded only in demat form

Settlement: The transactions are settled with T+2 rolling settlement

Load Structure

Entry Load: Nil
Exit Load: Nil

Tax treatment of Gold ETF

The Gold ETF is classified under mutual fund and will be taxed as per non equity mutual fund taxation rules. Investor investing in Gold ETF need not pay wealth tax. Investor has to pay taxes after redemption as per the tax laws applicable for non equity mutual fund. But, when the Gold ETF is redeemed for physical gold the taxation rules will be similar to that of physical gold.

Tax treatment of Gold ETF

Benchmark Mutual Fund - Gold Benchmark Exchange TradedScheme (NSE Symbol: GOLDBEES)
Kotak Mutual Fund - Gold Exchange Traded Fund (NSE Symbol: KOTAKGOLD)
UTI Mutual Fund - UTI Gold Exchange Traded Fund (NSE Symbol: GOLDSHARE)
Reliance Mutual Fund - Gold Exchange Traded Fund (NSE Symbol: RELGOLD)
Quantum Gold Fund - Exchange Traded Fund (ETF) (NSE Symbol: QGOLDHALF)

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