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Investing in Gold Bonds & ETFs FAQs

Can NRIs buy gold in India?

Yes, NRIs can buy gold in India.If you are looking to buy gold for Investment, it is advangaeous to buy in coins which are available in different denominations with international assay certification of its purity of being 25 karats pure gold. These can be bought from any authorised jeweller or bank.

What is a GETF?

Gold Exchange Traded Funds are open-ended funds and present a relatively cost-efficient and secure way to access the gold market but without the necessity of taking the physical delivery of gold. These funds may be bought and sold on a stock exchange after listing.

How do I invest in GETFS?

Initial investments may be made through a new fund offering (NFO) in the specified form of the mutual fund selling the GETF. Units during NFO will be available at the NAV-based price on allotment date. After the NFO, investors can buy or sell units on an exchange where the GETF is traded.

What type of account is required for trading in a GETF?

You need a trading account with an exchange through its broker and a demat account as GETF units are issued only in demat form.

Which is the benchmark index for a GETF?

As there are no indices catering to the gold sector or to securities linked to gold, GETF is currently benchmarked against the price of gold.

What is an exchange-traded fund with an example?

The exchange-traded fund is a basket that holds various types of stocks; these are passively managed with the aim of replicating the returns of an underlying index. Some examples of ETFs in India are Motilal Oswal NASDAQ 100 ETF, SBI ETF Sensex and Aditya Birla Sun Life Gold ETF.

Which is the best ETF in India?

The choice of the best ETF in India for a person is subjective in nature. Factors like trading cost, liquidity, expense ratio and tracking error determine which exchange-traded fund suits you. However, you have to analyse your risk profile and your investment plans thoroughly before investing.

Can NRIs invest in Sovereign Gold Bonds?

No, Non-Resident Indians (NRIs) are not allowed to invest in Sovereign Gold Bonds (SGBs). However, if a resident investor becomes an NRI after purchasing SGBs, they can continue to hold the bonds until maturity or early redemption.

What is an exchange traded fund (ETF)?

Exchange Traded Funds are mutual fund schemes in India listed on the stock exchanges and traded like common stock. The traded price of ETF units on the exchange reflects, before expenses, the value per unit of the underlying assets of the fund.

How do GETFS work?

Gold Exchange Traded Funds provide returns that, before expenses, closely correspond to the returns provided by the domestic price of gold through physical gold. Each GETF unit will be approximately equal to the price of 1 gram of gold.

Can NRI invest in a GETF?

Yes, NRI can invest in GETFs.

How is a GETF valued?

According to SEBI guidelines, since physical gold and other permitted instruments linked to gold are denominated in gold tonnage, a GETF will be valued on the market price of gold in the domestic market, and marked to market on a daily basis. The market price of gold in the domestic market on any business day will be arrived at as under:
Domestic price of gold = (London Bullion Market Association AM fixing in US$/ounce X conversion factor for converting ounce into kg for 0.995 fineness X rate for US$ into INR) + custom duty for import of gold + sales tax/octroi and other levies applicable.

What are the advantages of GETFS over physical gold?

Gold Exchange Traded Funds have the following advantages:

  • They are cost effective, because investors hold gold at the prevailing market price without being subject to designing and storage charges and insurance costs.
  • They carry no impurity risk unlike physical gold.
  • Their underlying asset, gold, is held by a custodian, and is, therefore, highly secure.
  • They have high liquidity and can be easily sold in an exchange at prevailing prices. Investors can also buy as little as 1 gram of gold through a GETF.

What is the difference between an ETF and a mutual fund?

The basic differences between ETFs and mutual funds are that ETF units are traded like stocks throughout the day while you can purchase mutual funds at the end of the day after the calculation of NAV.While mutual funds are actively managed by portfolio managers, ETFs are passively managed with the aim of replicating the returns of a particular index. In comparison to mutual funds, ETFs charge lower annual fees.

Are ETFs a good investment?

ETFs might be a good investment if you are planning to diversify your portfolio immediately. They are comparatively cheaper than mutual funds and might be a great choice for new investors. However, you need to keep in mind that ETFs cost more than stocks. They also offer less control over taxable income and do not hedge from volatility. Therefore, it is up to the investor to decide whether it is actually a good investment option or not.