2 Year Returns of Existing Gold ETFs

by Manshu on June 26, 2010

in ETF

I read that HDFC is coming out with a new gold ETF, so I thought I’d check out how the existing ones are doing, and see what is the difference in returns between the gold ETFs that are already present in the market.

I went to the NSE website, and looked up the closing prices for all 7 existing gold ETFs for the past couple of years.

Here is how they have moved over the past two years.

image

As you would have probably expected, the prices move quite close together, and you can hardly notice any difference between the ETFs.

Next up, I did a chart of the absolute returns of the gold funds that have been in existence for the entire two year period.

Here is how that looks.

image

GOLDBEES does the best (and it does quite well in volumes also, as I mentioned in my best gold ETF post), and that is due to the fact that its expenses are lower than the competitors. More competition is always good for the customer, but unless someone comes up with an ETF with expenses lower than GOLDBEES, I can’t imagine them to be the best on this chart.

{ 4 comments… read them below or add one }

gopal May 29, 2011 at 8:43 pm

Manshu,

Yesterday i invested in 10g of 22cr gold by buying a gold coin at 2126/gm. On top of this the jeweller charged me 3% dying charge and 1% VAT , put together came upto 22110.4

If i went for say GoldBees ETF to buy same 10g gold , Is there any extra charges i should pay ? Also once i decide to redeem the ETF worth 10g of gold to get cash – what will be the charges for it ?

Reply

Manshu June 6, 2011 at 4:12 pm

This is like a stock so you will have to pay commission that your broker charges on any share transaction. Outside of that you don’t have to pay anything – on sale or purchase. Theoretically, a gold ETF unit represents approximately 1 gram of gold, and not exactly 1 gram of gold because there are expenses that the fund charges which gets deducted. These are to the order of 1% per year.

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madhu July 20, 2011 at 1:04 am

Hi Manshu,
Thanks for the wonderful post on Gold ETFs.

After looking at the query from Gopal and your reply.. I was just curious of some calculations.

Seems like gopal paied an extra 4% to have the gold.
If we go in for Goldbees and planning to hold it for more than 4years (Note atleast 4% would have been paied to the fund house in terms of expenses)

So can I safely assume that if we are planning to hold to the gold investment for a long time it would be better in terms of physical gold?

Thanks in Advance
Madhu

Reply

Manshu July 21, 2011 at 5:24 am

Hmmm, well not entirely, they do have some liquid investments also which earn money for them so its not always a 1% reduction. And the other thing which you have to consider is how easily will you be able to sell physical gold. That’s the big thing in my mind because of the kind of comments I’ve seen here.

you can look at this comment thread to get an idea of what I’m talking about.

http://www.onemint.com/2010/04/14/how-to-buy-gold-coins-in-india/

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