Gold ETF in India

This post takes a look at the gold ETFs that are available to Indian investors. Right now there are six such gold ETFs in India.

Name Expense Ratio Pricing Per Unit Inception Date
Benchmark Mutual Fund – Gold Benchmark Exchange Traded Scheme 1% Approximately 1 gram of gold 08 – March 2007
UTI Mutual Fund – UTI Gold Exchange Traded Fund 2.5% Approximately 1 gram of gold 3rd Jan 2007
Kotak Mutual Fund – Gold Exchange Traded Fund 2.5% Approximately 1 gram of gold 21st June 2007
Reliance Mutual Fund – Gold Exchange Traded Fund 2.5% Approximately 1 gram of gold 1st November 2007
Quantum Gold Fund – Exchange Traded Fund 1.25% Approximately half a gram of gold 27th February 2008
SBI Mutual Fund – SBI Gold ETF 2.50% Approximately 1 gram of gold 30th March 2009

Update: Corrected inception date of GoldBees. Thanks to Kartik Shah for pointing it out.

75 thoughts on “Gold ETF in India”

  1. Is the SIP option available in Gold BeeS ETF from Benchmark Funds? i want to invest in gold ETF of Gold BeeS ETF from Benchmark Funds as SIP mode. Is it possible..pls advice.

  2. which IS BEST LONGTERM gold ETF SCHEME TO INVEST BY WHICH I WOUD GET THE BEST RETURNS OVER THE PERIOD OF TOME ?

  3. Hi Manshu,
    Your info on ETF was very useful. One basic question which everyone would be bugging you.With gold prices gone high already is it the right time to invest in ETF ?

    Thanks in Advance,
    Hari

    1. Hari – I really don’t have any particular insight on gold price movement. I’ve been personally staying away from it seeing all the retail interest, but I don’t have any special insight into the gold situation.

  4. hi manshu,
    i am an mba student , i am looing towards to make a project on gold ETF funds , so please can u help me out for colllection of data.

  5. 1. Is there an updated list of gold ETFs that are available to Indian investors?
    What is the relation of 1 gm of gold with the actual gold price?
    2. If the pirce of reliance shares come to half from what they are now, will it affect the price of its 1 gms gold?
    3. Is the expense of 1% like in the case of Goldbees, a yearly cost or only at the time of buying?
    4. or this 1% is charged every year?
    5. how is this charged?

    1. 1. Available on the NSE website – go to the ETFs tab there.
      2. 1 gram represents 1 unit after deducting expenses for all ETFs except for Benchmark.
      3. Yearly.
      4., Yes.
      5. Reduced from the NAV.

  6. whatare the volumes of the etfs in gold in india in the last 3 months as the marrige season is nearly over?Is the value likely to fall now after the season

    1. I don’t see gold ETF volumes getting impacted by the marriage season as this is an instrument strictly used for investment purposes.

      I don’t comment on the future of gold prices.

  7. You have mentioned that the inception date for Gold BeEs is 7th March 2008. This is very surprising given that Gold BeEs was the first ETF to be launched in Indian market. The correct inception date is 08.03.2007 as taken from their own website: http://www.benchmarkfunds.com/Products/GoldBeES/Overview.aspx

    May be this comment comes very late as the post is nearly a year and half old but it would still make sense in updating the facts, if not already done yet.

    Best Regards
    Kartik Shah

    1. Thanks Kartik – I apologize for the error, and will fix it. I think this list misses a few other newly launched ETFs also, so will update that as well.

  8. Hello Manshu,

    After going through all the discussions here in the blog, the question that araised in my mind is in what way the gold ETF is better than buying a gold coin.

    One more question is the expense ratio is calculated on weekly basis (as per the discussion above), in that case will the expense ratio gets decreased from our invested amount?

    Dont mind if my questions looks silly 🙂 :)..

    Thanks in advance!!

    1. Hi Viswanath,

      After seeing the debate of gold ETF vs real gold coins rage all over, I feel that there are pros and cons to both, and ultimately it comes down to what you are comfortable with. If you are okay with buying coins from a jeweler and know that they will buy it back from you at market rates without cutting too much then go that route (remember banks don’t buy back their coins).

      If on the other hand you prefer to trade electronically, and want to invest smaller sums over a longer period of time, and want to take advantage of the liquidity of the ETFs then gold ETFs are for you.

      I don’t think I understand your second question clearly….the costs are calculated on a weekly basis and do change from time to time, but not sure how that implies it will go down.

      1. Thanks for the qucik response Manshu.
        The question is lets suppose that i have invested Rs. 10000 in gold ETF’s, the expense ratio for the 1st wk would be arround 150 (1.5%) per wk. So monthly arround 600 will be charged as expense ratio, now this 600 is reduced from my 10000 investment?

      2. Manshu, you have been rating Gold BEE ETF as the best among the Gold ETFs. But to my observation, SBI Gold ETF is doing better. When all the Gold ETF’s prices dropped, Gold BEE and SBI Gold ETF were almost at same price of Rs. 1780-1790 range. And now, SBI gold ETF is 1900+ while, Gold BEE is below 1900. Also, I find that SBI Gold prices move up faster than Gold BEE.

        1. When you compare ETFs say Benchmark and SBI I would suggest few more points to consider such as:
          1. Volume in the schemes – I believe ETF with more volumes is certainly better.
          2. Compare two on slightly long range data. ETF with less transactions is easy to manipulate.
          3. Benchmark started operations in 2008 whereas SBI started its operations in 2009. With higher rate of expenses its net worth will certainly comedown over a period of time.

          Thanks

      3. Few things that come to my mind regarding Gold bars/coins vs Gold ETFs:

        Disadvantages of holding bars/coins:
        – You are forced to buy in pre-determined quantities
        – Storage and safety concerns
        – Banks do not buy them back
        – Jewellers might charge a margin while buying from you

        Advantages of holding bars/coins:
        – Available to you even when banks collapse or close (wars or financial meltdowns)

        Advantages of holding Gold ETFs:
        – Affordability – you buy the amount that you can afford
        – Convenient – no hassles of storage and safety

        Disadvantages of holding Gold ETFs:
        – During wars or economic crisis, banks might close or collapse. So you won’t have access to your gold investment

        1. Absolutely Dynamite, though I’m not very sure how will people use gold in case there is a war or something. I mean I think it’ll be really hard to sell, and if you do sell and get money out of it then that might be risky to keep and that kind of thing. But paper vs real thing – I’d totally wish to have the real thing if there is a war.

  9. Pingback: List of Gold ETFs
  10. Dear Manshu,

    You said you are not pro. but believe me the info provided by you is not less than any pro.

    Do you think any security issue should also be considered before investing in ETFs. Will you rate SBI ETF better than Benchmark on this count?

    Thanks in Advance.

    1. That’s a good question, and I will consider that factor in most cases, though probably not very high in the list because they are supposed to hold physical assets with them, and it is not structured as an ETN, where this factor probably becomes the number 1 factor. \

      Also, Benchmark is doing great volumes so that should bring some confidence as well. Here is a post comparing the volumes:

      http://www.onemint.com/2010/04/19/which-is-the-best-gold-etf-in-india/

  11. hey manshu,

    will u please tell me in which gold etf i should invest now.

    this is a stupid question when u already answered it that expense ratio must be considered.

    but i m still confused because the expense ratio of all the Gold etf are same i.e., 2.5%.

    thats why i m confused.
    looking forward for your reply.

    GBU.

    1. It is a good question, and slightly difficult one too.

      You can see that the expense ratio of Benchmark are the lowest. I have not done an exercise to take the value of all gold ETFs and compare their returns for the past couple of years, but this will be a good thing to do. It will show you how much expenses are eating up returns. Liquidity or volume is another factor.

      I don’t make recommendations on this blog because I am not a professional qualified to do so, but these will be the factors I would look at.

        1. I don’t know why it isn’t in Moneycontrol and couldn’t care less if it is there or not. It makes no difference at all to me whether a particular fund is listed in their system or not. I have seen and analyzed the price data directly from the NSE website many times, and you can see the results on some of the posts here too.

          Why is it a concern to you if something is present in the MC system or not?

  12. Hey Manshu,
    I dint understand what do you mean by Thinly traded?
    Regarding Tracking error, where is that cited? Do ETFs mention that somewhere?

    Thanks
    Anand

    1. Hey Anand,

      By thinly traded I meant ETFs that do not have much trading volumes. You can find out trading volumes by going to nseindia.com, entering a ETF code, and pulling up information about it. You can compare a few ETFs of the same category to see what each one looks like.

      Tracking error is generally given in the Statement of Additional Information (SAI) or prospectus. You can compare them to see how each fares.

    1. All these physically buy gold and keep so that is one thing that is common in them. They charge you fee which is called “Expense Ratio”. The higher the expense ratio the more fee they charge. So that should be a factor to consider while buying.

      1. Hi Manshu
        1. Is the expense ratio only criteria for buying?
        2. Is it possible to buy/sell these ETFs from ICICI direct?

        Thanks for your anwer in advance
        Anand

        1. 1. Expense ratio is one biggie, volumes are another. You don’t want to buy in something that is thinly traded. I think tracking error is also important which means how close are the NAVs and actual price of the ETF.

          2. Yes, it is possible to do so. You can do it from the Stocks tab.

              1. After reading info provided by you I went little further and I came to know that all these ETFs have to maintain strict backup of physical gold with them. One ETF is more or less equivalent to one gram of gold. variation in there prices is due to difference in their service charges. In that sense you were very correct when you advised to purchase an ETF which have the least Service Charges. In case of ETFs particularly Security is not a big issue. As you correctly said earlier that our selection of ETF should be based on the quantum of dealings and the services charges they charged.
                Pl. share in case you found any new facts in this concern.
                Thanks

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