Gold is a very popular asset class in India. A balanced investment portfolio should contain 5-10% gold. The financial market gyrations over last two years proves this point. You could buy the metal and store in a locker and feel safe. If the banking system collapses (I guess this unthinkable scenario is possible), you have some metal in your safe. However, physical gold is not liquid and you can only keep so much gold at home or in the locker (and not worrying about theft).
Gold ETFs are units of gold held in DEMAT form and is usually quoted per gram of gold. ETFs invest in standard bullion. There are seven Gold ETFs traded in National Stock Exchange (NSE). The returns on Gold ETFs mostly track that of physical gold. Gold ETFs are treated as non-equity mutual funds for the purpose of taxation. The low expenses, ease of transaction, and transparency makes this an attractive way to take exposure in gold.
The most popular amongst the ETFs is the one offered by Benchmark (GOLDBEES) whose total holdings is equivalent to 4.5 tonnes. GOLDBEES average trading volume is in the range of 35,000. The chart below is the recent performance of GOLDBEES, which has corrected from the peak at 1825. Go for gold!
