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.

List of Gold ETFs

There is a lot of interest in Gold ETFs these days and since I have already created an exhaustive list of gold mutual funds with their expense ratios, I thought I’d create a list of gold ETFs too. This list has ETNs also, which sound similar to ETFs but are a different product. To know more about ETNs click here.

Gold ETFs that Own Physical Gold

  1. SPDR Gold ETF (GLD): This fund actually holds physical gold.
  2. iShares Comex Gold Trust (IAU): This is a gold ETF about which I have written in the past, click here to read that post. This ETF also holds physical gold.

Gold ETFs that Own Gold Mining Stocks

  1. Market Vectors Gold Mining ETF (GDX): This fund holds stocks of gold mining companies from around the world.

Gold ETFs that own Future Contracts

  1. Powershares DB Gold Fund (DGL): This fund holds future contracts which reflect the upwards price movements of gold.
  2. E-Tracs CMCI Gold Total Return ETN (UBG): This is an ETN and tracks the upwards price movement of gold.

ETF Double Gold

  1. Proshares Ultra Gold (UGL): This fund will give you daily returns and will move double the price of gold in a day.
  2. Powershares DB Gold Double Long ETN (DGP): This is an ETN that moves double the gold prices.

Gold Short ETFs

  1. PowerShares DB Gold Short ETN (DGZ): This is an ETN that moves up when gold prices go down. So, this works like a gold short ETF where, if the price of gold moves down by 2%, this ETN will go up by 2%
  2. PowerShares DB Gold Double Short ETN (DZZ): This is also an ETN that moves up double the amount that gold prices go down. So, if gold prices go down by 2% this fund will move up by 4%.

ETF Gold India

  1. Kotak Gold ETF (KOTAKGOLD): This is Kotak’s Gold ETF that tracks the price of Gold in India. The ticker is for NSE.
  2. UTI Gold ETF (GOLDSHARE): This is UTIs ETF that tracks the price of gold in India. The symbol is GOLDSHARE and is for NSE
  3. Reliance Gold ETF (RELGOLD): This is the Reliance Gold ETF that tracks the price of gold in India and the symbol RELGOLD is for NSE.

If you are interested in gold ETFs in India in particular then this page has a list of all the Gold ETFs traded in India, and this one shows you the two year performance of gold ETFs in India.  I did a small piece on the expense ratios of two new gold ETFs – HDFC Gold ETF, and ICICI Prudential Gold ETF, which may also be of use to you.

Other investors find the page about gold mutual funds quite useful.

Gold ETF: iShares Comex Gold Trust (IAU)

iShares Comex Gold Trust (IAU) is a Gold ETF, which holds physical gold as its underlying asset and moves in tandem with gold prices. The sponsor of IAU is Barclays Bank and it trades on the NYSE ARCA. As the sponsor — Barclays has appointed The Bank of New York as the trustee and it is responsible for the day to day administration of the trust.

The Bank of New York has further appointed The Bank of Nova Scotia as the custodian and it is responsible for the safekeeping of the gold owned by the trust.


IAU Backed By Physical Gold

IAU holds stock of physical gold which is held by the custodian near New York, Montreal, Toronto and London. There are different types of commodity funds — some that create future contracts to reflect the price movement in the underlying asset, others hold stocks of mining companies and some actually hold the underlying physical asset. IAU falls under this category.

IAU: Expense Ratio

IAU has an expense ratio of 0.4% and compares favorably to other gold funds and their expense ratios.

IAU is a Passive Investment Vehicle

IAU is passive in nature and it doesn’t engage in gold trading. To that extent — this investment should be strictly viewed as a proxy for buying gold. If you are looking for a gold mutual fund that actively engages in trading the commodity and earn profits — over and above gains in gold prices — then this is not the right investment vehicle for you.

Factors Affecting Gold Prices

Gold and the Dollar

Gold has rallied in the recent past with the anticipation that the Fed’s printing press will cause inflationary pressures and lead to a crash in the value of the dollar, and people have been buying gold to protect themselves from the dollar crash, as historically, there has been an inverse relationship between the value of the dollar and gold prices.


Gold: Demand and Supply

In 1998: 2,574 tonnes of gold were mined globally. This figure has slightly declined to 2,476 tonnes in 2007. So, in the last ten years or so — gold mining has been stagnant and even witnessed a marginal decline.

At the same time the total fabrication (major demand component) declined from 3,737 tonnes in 1998 to 3,072 tonnes in 2007.  So, even though supply fell, demand fell at a faster rate.

This is an interesting trend, but since gold is a precious metal — the simple equation of demand and supply for fabrication is more of an indicator, than a decisive factor determining the direction gold prices. Other factors like dollar declines, stock market downturns etc. play a significant role in determining the price of gold.

On to IAU itself, it is a good vehicle for someone considering passive investment in gold but who doesn’t wish to hold physical quantity for whatever reason.

Disclaimer: I don’t own IAU at the time of writing