Gold exchange traded funds (ETFs) are soon going to become a reality in our country. The entire perception regarding using gold as an investment avenue is likely to change soon, especially among conservative investors who use gold as a hedge against the inflation.
With the permission to allow Gold ETFs, Sebi has enabled mutual funds to purchase physical gold and issue units to the buyers against the same. However, since the units will be issued in demat form, investors will have the comfort of offloading any number of units on the NSE without having to bear any exit load.
Only brokerage charges will be incurred. The entry of gold ETFs in India is likely to be started by Kotak Mutual Fund, UTI Mutual Fund and Benchmark Mutual Fund. As of now, investors have the option of only using commodity exchanges such as the MCX and NCDEX to trade in gold. This happens in the form of gold futures.
Gold futures investors would need to watch ETFs closely. In case of gold futures, the cost of carrying turns out to be high as compared to holding units of a gold ETF in the demat account. However, despite such a possibility of gold ETFs taking over the business from investors trading in gold futures through commodity exchanges, commodity exchange members are not bothered.
