Key Takeaways
- Gold ETFs allow you to invest in gold without buying physical gold. This guide explains what Gold ETFs are, how they work in India, the best Gold ETFs available, tax implications, and how to use Gold ETFs for portfolio diversification.
What is a Gold ETF?
A Gold ETF (Exchange Traded Fund) is a financial instrument backed by physical gold, listed on stock exchanges like NSE. One unit of a Gold ETF typically represents 1 gram of 99.5% purity gold. You buy and sell Gold ETF units through your Demat and trading account, just like buying stocks.
How Gold ETFs Work in India
- The fund house buys and stores physical gold in secured vaults
- It issues units backed by this physical gold
- Units are listed on NSE/BSE and traded during market hours
- Price of one unit tracks the market price of 1 gram of gold
- You can buy as little as 1 unit (1 gram) — very low barrier to entry
Best Gold ETFs in India (2026)
| Gold ETF | Expense Ratio | Fund House | Liquidity |
|---|---|---|---|
| Nippon India Gold ETF | 0.82% | Nippon AMC | Highest |
| HDFC Gold ETF | 0.59% | HDFC AMC | High |
| SBI Gold ETF | 0.65% | SBI Funds | High |
| ICICI Pru Gold ETF | 0.50% | ICICI AMC | High |
| Axis Gold ETF | 0.59% | Axis AMC | Medium |
Gold ETF vs Physical Gold
| Feature | Gold ETF | Physical Gold |
|---|---|---|
| Storage | No storage needed — demat | Physical vault/bank locker needed |
| Making charges | None | 10–25% making charges on jewellery |
| Purity | Guaranteed 99.5% | Variable (jewellery: 18–22 carat) |
| Liquidity | Instant on stock exchange | Dealer/pawn shop required |
| Investment amount | 1 gram minimum (~₹6,000–7,000) | Can vary widely |
| Taxation | LTCG at 12.5% after 24 months | LTCG at 12.5% after 24 months (from 2024) |
Taxation on Gold ETF in India (2024 onwards)
- LTCG: Profits on units held 24+ months → 12.5% tax (no indexation benefit after July 2024 amendment)
- STCG: Profits on units held less than 24 months → taxed as per income tax slab
Gold ETF vs Gold Fund of Fund
- Gold ETF: Traded on exchange like stock; requires Demat account; price updates real-time
- Gold Fund of Fund (FoF): Mutual fund investing in Gold ETF; can invest without Demat; SIP available; NAV updates once daily
If you have a Demat account and can invest lump sum, Gold ETF is more cost-efficient. If you want SIP or don't have Demat, Gold FoF works well.
Why Include Gold ETF in Portfolio?
- Gold tends to rise when equity markets fall (negative correlation) → portfolio diversification
- Hedge against inflation and INR depreciation
- Safe haven during geopolitical uncertainty
- Recommended allocation: 5–15% of investment portfolio in gold
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