| Parameters | Sovereign Gold Bond | Gold ETF | Gold Mutual Funds | Physical Gold |
|---|---|---|---|---|
| Issuer | RBI on behalf of GOI | Mutual Funds / Other entities | Mutual Funds | N/A |
| Who can invest | Individuals, HUF, Charitable Trusts, Universities | Anyone | Anyone | Anyone |
| Form of Holding | Physical Holding Certificates/ D’mat. | D’mat. | Electronic Form (Statement of Account) | Physical |
| Min Investment | 1 gram | 1 gram | Rs.1,000/- (depends upon scheme to scheme) | Any Amount |
| Max Investment | 20kg for institutions & 4kg for all other investors per year | Any Amount | Any Amount | Any Amount |
| Interest rate | 2.50% p.a credited semiannually (Taxable) | N/A | N/A | N/A |
| Redemption Value | Average of closing price of gold of 999 purity of previous 3 business days from the date of | Gold ETFs are represented by 99.5% pure physical gold bars. | As per underlying value of holding (generally Gold ETF) | Prevaling price of gold |
| Tenure | Lock-in for 8 years, early redemption from 5th year | No fixed tenure | No fixed tenure | No fixed tenure |
| Liquidity | Traded on stock exchanges (Only if held in D’mat) | Traded on stock exchanges. | Can be sold back to fund anytime. | Fairly liquid. |
| Exit Load | N/A | Nil | Applicable between 1-2% for upto 1-3 years. | Nil |
| Tax | No TDS. Interest is fully taxable. No Capital Gains tax if held till maturity. Capital Gains Tax applicable if | Capital Gains Tax is applicable | Treated as Debt Mutual fund. Capital Gains Tax charged as applicable | Capital Gains Tax is applicable |
| Impurity Risk | None | None | None | Yes |
| Pledge | Yes | No | Yes | Yes |
| Cost of Holding | Nil | Fund Management cost applies. (Generally between 0.50 – 1.00% per year. | (Generally between 0.50 – 1.00% per year. Fund Management cost applies. (Generally between 1.00 – 1.50% per year. | Nil |
Should You Invest In Gold?
Wow or Oops!
Let us look at the recent Gold ETF returns..
Returns ( as on 31-May-20)
| 1 Year | 3 Year | 5 Year | 7 Year |
|---|---|---|---|
| 46% | 16% | 11% | 7% |
Source:MFI, Fundsindia Research Returns ( as on 31-May-19)
| 1 Year | 3 Year | 5 Year | 7 Year |
|---|---|---|---|
| 2% | 2% | 3% | 0% |
Oops. We need to sell Gold 🙁
Same asset class – but two completely different interpretations!
Note: Returns of Nippon India ETF Gold BeES (largest Gold ETF with AUM above Rs. 3,500 crs) is used for illustration How do we form our return expectations?