2 Year Returns of Existing Gold ETFs

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.

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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.

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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.

107 thoughts on “2 Year Returns of Existing Gold ETFs”

  1. Hello,
    It is a very informative site especially for amateurs like me who have just woken up from their slumber & want to do some investment.

    1.Would request you to provide your advice regarding investing in Kotak gold etfs. 2.Are they safe? 3.what is the return expected? (in case you have an analysis) 4.what is the minimum amount that one can invest & a minimum period by which one can expect returns on the same?
    5.tax policy for it

    1. 1. I don’t advise individuals on this site. There is information given for all to see and then they can make the final decision based on their judgment.
      2. I don’t have any special insight on whether they are or aren’t.
      3. No one really knows what returns to expect, a lot of people are happy to offer their opinion on what returns to expect but it’s just that – their opinion. I don’t know what to make of it.
      4. One unit is the minimum you will have to buy. Quantum funds have the ETF which represents half a gram of gold and its about 1,000 rupees so that’s the lowest.
      4. There are short term and long term capital gains on sale of them. Short term is less than 1 year and long term is more than that.

  2. Dear Friend,
    Let me confirm is any holding charges charged by amc if I hold uti etf,sbi etf or any other etf more than one year.

    Regards
    Satish Rao

    1. Gold ETF charge expenses that get reduced from the NAV, so you won’t have to pay anything directly, but there will be a charge that will reduce your NAV.

  3. hey manshu,
    i want to invest in gold etf mostly in goldbees,so when i take money back by selling etf then will it be taxable,so why to invest in etf have advantage over mfs,what will be good if i m a long term investor goldbees or in bluechip stock

    1. Yes the profit will be taxable as capital gains. GOLDBEES or Blue chip stock can’t be compared directly since one is to take exposure to gold and the other one is to take position in a company.

  4. Hi Manshu,
    Please tell me Gold ETF are Better then eGold of NSEL?
    what are the diffrent charges and return in both kind of investments.

    1. Both have pros and cons Mukesh – I’ve seen NSEL return more than gold ETFs lately, but they have a shorter track record, and I don’t quite understand how exactly they work so personally I’d prefer a gold ETF.

  5. Indeed a very good research work and very information discussions here.

    Shall appreciate if you could have added the return of Gold Coins or Gold Bars, if invested, in the last 2 years. That will make the comparision more complete and will be able to provide a more realistic and informed decision for the investor out here

    1. The difficulty in including that is the lack of liquidity and differences in how jewelers and banks add premium, and then deduct a certain percentage while buying it back. It makes the comparison less consistent, as the same terms are not available to every investor.

  6. Hi,
    As an NRI can I invest in Gold ETFs. Also as an NRI are their any taxes to be paid if the Gold ETF is sold after a year.
    Thanks

  7. Hi,
    As an NRI can I invest in Gold ETFs. Secondly do the same rules as investing in Mutual Funds apply to NRIs when trading in Gold ETFs.
    Thanks

  8. Hi friend

    i have started buying goldbees 🙂 thanks for your guidance.I have bought 3 shares one at 2000 then 1970 and now 1930 rs.

    Is there any risk in buying and holding etfs for long time? any tax we need to pay or is there any maximum peroid we can hold?

    And also pls let me kno shall go with sip method for goldbees?
    thanks in advance

    1. The risk is that prices are dependent on the prices of gold, so if gold goes down then this will go down as well. Since you are buying a single unit every month, I’d say there is no need to get fancy as you can execute this trade yourself also. Otherwise the post on SIPs in ETFs has several options to do this, and then ICICI Direct has launched a way to set up SIPs in stocks also, but since they execute just market orders that can get risky.

  9. Sir,
    I need to build a corpus for my child education within two years. My daughter is now in 10 th std.
    Currently i am saving Rs 11000 per month thro sip in mutual funds. I am planning to invest further Rs 10000 per month that too in Gold ETF not in mutual funds,
    My current saving is 5000 in BSL front line equity, 2500 BSL tax saver, 2500 in HDFC equity, 1000 in DSP black rock micro cap fund. So far accumulation is Rs 300000. Can you advice how to proceed further ?

    1. I’m sorry but I don’t give out individual advice this way because I’m not an advisor and don’t have the skills to look at your situation and say what will be best for you. In general though you should diversify your investments so if one goes down the others are still intact.

  10. hi,
    I want to gift Gold ETF to my just born Nephew. Is it possible to gift Gold ETF ?
    For that, Can I buy ETF in physical form just like physical certificate ? and not in demat form, so I can gift easily.
    If yes, then pls. let me know how to go about it.
    Thanks in advance
    gcp

    1. You can’t give a gift o a physical gold ETF.

      I’m not sure how one goes about gifting a gold ETF but that will be similar to transfer of share, you will have to figure out the details and tax implication though because I’m not familiar with those.

  11. Dear Manshu
    Ur replies r usefull.Can I REQUEST U TO INFORM HOW SECURE IS GOLD ETF.In case mismanagement like UTI did such as they do not purchase gold as desired by law &subsequently fiirm become bankcrupt .kindly discuss all possibilities of insecurity of gold purched through ETF
    GK Pharlia

    1. The thing here is that ETFs are regulated products, and their gold holdings are audited regularly. So, if the audit doesn’t happen properly, or if the regulator fails then there is a chance of fraud.

      For someone like me, there is no way to check if the audit is going to fail or if there is some other problem, so I can’t really comment on that beyond letting you know that there are audits of the physical gold, and that there is regulation of these products.

  12. Thank you so much Manshu.. your response did clarify doubts that i had.
    Please address some more queries:
    Is there any tax avoidance applicable for investing in GETFs?
    Also, is there any limit to the amount one can invest?
    Can a person apply threshold re-balancing here aswell? If yes, how?
    Actually am an MBA student and am learning Personal wealth management so have to understand various investment options before the term end.

  13. If thats the case, I appreciate it. Could you just tell me, What is the expected returns, the lock in period if any and what is the minimum amount of investments? Also, how risky is it in comparison to other investment options ? Please reply.

    1. There is no lock in period in case of ETFs Navleen, they are just like other shares, and you can trade in them without any lock in period. The minimum investment is one unit, and the lowest is Quantum Gold ETF which trades at about Rs. 1,000 right now.

      As far as risk is concerned – the ETF prices are tied closely to gold prices, and there are no assured returns, so it is risky than a bank deposit where your sum and interest is assured. In this case – there is no guarantee on the sum or growth. If gold prices go up, then the gold ETF will also go up, and if gold prices decline then the gold ETF price will also decline.

      As for expected return – I don’t know that and others will tell you that gold never drops in value, and it can only go one way that is up etc. etc. but that’s just their opinion. No one knows for sure, and so I find it best to avoid into any discussion of returns from gold prices.
      My personal opinion for whatever it’s worth is listed in this post, but I’ve been wrong about it the last couple of years as gold prices have gone up.

  14. Hello,

    I have a surplus of 10-15k per month that i can put to investments. Do you think GETFs should be a good idea as i need to build a good corpus (20lacs or more) by next 5-6 years? What is the expected returns and what is the minimum amount of investments? Also, how risky is it in comparison to other investment options as my risk profile is low ? Please reply.

    1. All Gold ETFs hold gold and other assets like debt, and they have expenses that eat up their returns also, so that’s the reason why the returns are different. At some point in time any ETF doesn’t hold 100% of their assets in gold, some percentage in gold and other in debt instruments, so the returns are not going to be exactly the same Apoorva. They’re going to be close like you see in the chart above, but not to the last rupee.

  15. I am salaried employee & have taken an tax saving mutual fund, (growth option) in terms of SIP of 2000 per month & will complete 3 years lock in period this Dec, 2010..I have heard, i can take only proportinately for each & every SIP completing 3 years..So need to wait another 3 years to have corpus fund. Whats should i go for now ?? Shall i redeem proportinate NAV each month being tax free & work as Monthly income for me or other option to invest this amount again…Also can i change to dividend option ?? Also since need to nivest 2000/ month for coming time, shall i continue with same SIP or other plan ..no .Pls help me decide ??

  16. Mr.Manshu,
    As a beginner in GOLD ETFs I found the information provided by you very useful.
    I like to invest in GETFs as an investment in this volatile market situation&poor bank interest rates.I found GOLDBEES gave the max.2 year return from your chart.While RELGOLD is the cheapest-about Rs 57/less today.
    Please advice which one I can choose for better returns.Thanks
    Ravikumar

    1. The absolute price doesn’t indicate if the ETF or even share is cheaper or not. In terms of expenses – Benchmark is currently the cheapest as far as I know.

  17. I understand your point about difference between MF and ETF. But, you say “So you need to know what does unit of an ETF represent?”. But, my point is that we don’t know what a unit of ETS represents. Depending on how long ago the ETF was founded, 1 unit could represent 0.9 gram, or 0.8 gram or even 0.4 gram. Isn’t this an issue?

    e.g. Is there any way to find out how much gold does 1 unit of Kotak gold ETF represent today?

    1. Yes Sandesh – that info is present in the annual report that the funds file. For example I have the Benchmark report on my hard drive here, and it shows that on March this year they had 4,663 kilos of gold, and had 4.79 million ETF units, so that way you can calculate the numbers. You can check this out for Kotak, and there might be more recent numbers out there somewhere which I haven’t seen yet.

    2. This is one of the reason that I have been suggestion readers here to invest in DIRECT GOLD and SILVER through invest in E-GOLD and E-SILVER.

      When you invest in E-Gold and E-Silver you are buying Gold in exactly 1 gm lot and for Silver 100 gms lot size.

      The price in available online from 10AM to 11:30 pm online and in line with the Indian Market price . The underlying asset is in Exchange nominated VAULT and can always be exchange for physical metal anytime.

      To know more, pleased let us know, we will help you in your investment

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