Gold ETf vs Physical Gold. which option is better

Out of "Gold ETF or Physical Gold", ETF option is many times better if the objective is for investing. It provides the following benefits over the Physical Gold:

1) The Custody worries as ETFs are only reflected in the Electronic form

2) The Liquidity at full prevailing Prices without any other Taxes or levies - in comparisons with Physical Gold

3) Ease in Liquidity.

4) LTCG: If you sell after holding for 36 months, you generate long-term capital gains. These gains are taxed at 20% (plus any cess) with indexation



ETF is better than physical gold has the transaction costs are much lower and it is safer storage cost is also much lower otherwise you can also look at sovereign gold bonds which are issued by RBI monthly on a monthly basis and they even pay a rate of interest of 2.5% on it
Gold ETF is definitely a better option than holding physical hold. Unlike in physical gold, there is no storage cost, no liquidity concerns, no purity issues or making charges in case of Gold ETF. Since Gold ETFs are listed on the exchange, you can buy or sell any time.

Gold provides a good diversification to the regular asset classes (such as Equity / Debt etc.) and is often uncorrelated to them. So, the question is how does one invest in the same.

Physical Gold provides the diversification above and you have full control as well as physical possession of the same. However, you run with some unique risks – is the Gold which you are holding pure or does it have adulteration ? Where do you store it securely as there is risk of theft = and you possibly would need a locker ? How do you access the Gold if you are traveling to some other city  etc. and therefore can become illiquid from time to time.

Gold ETF tries to provide the same diversification into Gold with convenience through financialization of Physical Gold. Physical Gold (of defined purity) is held centrally by an Asset Management Company and against the same units are issued which are traded on the Exchange. So without holding the physical gold, one can buy units of Gold (so no purity risk / security risk / need for locker etc.) and these are exchange traded (so no liquidity risk and accessible from anywhere).

So one can choose physical Gold or Gold ETF depending on what convenience once is looking for. For a retail investor, a Gold ETF would be superior for the convenience it offers.


All the data/information shared above are opinions/ views that solely belong to the Mutual Fund Distributors. UTI Mutual Fund (acting through UTI Trustee Company Pvt Limited) / UTI Asset Management Company) owes no responsibility/ liability whatsoever in this regards. The information contained should not be construed as forecast or promise, and the only objective of this initiative is to educate the consumers to take a more informed investment decision. Any investment decision taken based on the information provided in the content above shall be at sole risks, cost and consequences of the user.



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