India is a country obsessed with gold and ranks second in its consumption. Keeping gold in physical form comes with its own risks in the form of security and the high cost of safekeeping.

But we are living in the 21st century, and so we have the option of not just keeping gold in the physical form but also shares in our demat account. Gold ETFs provide us with this advantage. 

In this blog, we will cover all the essential topics, including the definition of Gold ETF in India, its performance, and the advantages of investing in Gold ETFs. Keep reading to know more.

What is Gold ETF in India?

Gold ETFs are investment baskets that focus on gold bullion and follow the domestic gold rates. They are the electronic form of gold with a 99.5% pure gold backing, making them a fantastic alternative to physical gold investment.

Even small investors can invest in gold exchange-traded funds, as the minimum requirement is one unit equivalent to one gram of gold. Trading in gold ETFs in India is straightforward as they trade on stock exchanges, allowing investors to access gold exposure while continuing to operate in the market. ETFs may be bought and sold on stock exchanges such as NSE and BSE.

Gold ETF Returns

Gold ETF returns refer to the earnings or revenue generated from the ETFs. As there are varying risks associated with gold exchange-traded funds, it can be challenging for investors to find suitable investment options. In such a scenario, return on gold ETFs plays a crucial role in guiding their investment decisions.

To safeguard yourself against market drop, you can opt for some of the best gold ETFs in India, mentioned below:

Gold ETFs1 Year Return as of 23rd Feb 20225 Years Return as of 23rd Feb 2022
Invesco G-ETF1.4%9.81%
HDFC Gold ETF7.80%10.03%
UTI-Gold ETF0.79%9.57%
Nippon ETF Gold6.41%10.03%
Axis Gold ETF7.08%10.08%
IPRU Gold ETF7.07%9.91%
Kotak MF-GETF7.04%10.19%
Birla Gold ETF7.09%10.25%

Gold ETF Performance

Gold ETF Performance

Invesco India Gold Exchange Traded Fund is an excellent investment option for those who want to invest in actual gold. 

The fund aims to deliver returns that closely match the price of gold. Since its launch on 12th March 2010, the gold ETF return stands at 8.65%, with an expense ratio of 0.55%. It tracks the domestic gold rate index and has accumulated assets worth INR 77 Cr.

How to Trade Gold ETF in India?

To trade in gold exchange-traded funds, follow these steps:

  • Firstly, create a Demat account.
  • You can purchase gold ETFs through a broker on the BSE/NSE using a Demat and trading account.
  • Alternatively, investors can buy gold ETFs through an online platform with the help of a broker, provided they have a Demat and trading account.
  • It is important to note that when buying or selling gold ETFs, you will need to pay a brokerage fee and a nominal fund management fee, if applicable.

Gold ETF Benefits

Gold ETFs are investment securities that invest in conventional gold bullion, which has a purity of 99.5 percent. The value of units of an ETF is determined by the current market price of gold, and the advantages of investing in ETFs are as follows:

  1. Liquidity: 

Gold ETFs are highly liquid and can be easily converted into cash whenever required. There is no lock-in period, and you can sell them anytime.

  1. Flexibility: 

Gold ETFs can be purchased and deposited online in your Demat account. You can enter or exit the investment as per your choice, and the asset management firm trades them on a stock exchange.

  1. Trade-in Small Denominations: 

Investors can buy or sell gold ETFs in small denominations, as low as one unit equal to one gram of gold, making it a cost-effective investment option.

  1. Reasonable: 

There are no entry or exit restrictions for gold ETFs listed on the stock exchange, and there is no fee for purchasing or selling units. However, investors will have to pay brokerage costs.

  1. Hassle-Free Holding: 

There is no risk of theft as gold ETFs are held electronically in the Demat account, and investors can save on safety deposit locker charges.

  1. Cheaper than Physical Gold: 

Unlike physical gold, which incurs making charges, wealth tax, and VAT, gold ETFs have a 1% cost ratio and brokerage fees of 0.5 percent or less.

  1. Well-diversified: 

Gold ETFs are an excellent option to diversify your investment portfolio and can provide better returns during market uncertainty while reducing risks.

  1. Real-time Trading: 

Gold ETF prices are updated and traded in real-time, similar to stocks trading on the stock exchange.

  1. Tax-efficient: 

Gold ETFs are exempt from wealth tax. However, short-term investments (sold before three years) attract income tax at the investor’s income tax bracket rates, while long-term investments sold after three years of purchase (with indexation benefits) attract 20.8 percent (including cess).

The Bottom Line

Financial experts suggest that gold should constitute 10% to 20% of an investment portfolio. Gold exchange-traded funds are an excellent option to diversify the portfolio while acting as a hedge against inflation, currency risk, and market volatility.


Are gold ETFs a good investment?

Investors who find buying actual gold either complicated or expensive can diversify their portfolio by investing in gold ETFs. Gold is considered a safe asset because its value is known to be stable and not prone to sudden fluctuations.

Is it better to buy physical gold or gold ETF?

Investors who find physical gold difficult to sell or too complicated and expensive can opt for gold ETFs that can offer a more fluid and cost-effective solution. Gold ETFs with a low expense ratio of 0.20 per cent or lower can be particularly attractive for diversifying one’s portfolio.

Do gold ETFs pay dividends?

Gold ETFs which invest in companies dealing in the mining of gold can pay out dividends. The gold ETFs, which are invested in gold futures or physical gold don’t provide any dividends.