Gold ETF units are just like units of a mutual fund. They are listed on the stock exchange and traded just like equity shares. Units of Gold ETF can be bought and sold just like how units of equity shares can be bought and sold through a stock exchange. Just like a single unit in shares represents 1 equity share; similarly in gold ETF’s one unit represents one gram of gold. At the current prices of gold at Rs 17,000 one gold ETF unit (1 gram) will entail an investment of Rs 1700. While the minimum quantity that can be bought and sold is one unit (1 gram); the maximum number of units that can be traded depends on the paying capacity of the person.
Buying of gold ETF units gives the person exposure to pure gold. All the units of gold ETF mutual fund that are traded on the stock exchange are backed by purchase of physical gold by the mutual fund that has launched the ETF. The gold ETF mutual fund invests in standard gold bullion (99.5% purity). The price of a unit of gold ETF tracks the price of gold in the international market. By holding the gold ETF units in his demat account, the investor can benefit from the rise in the price of gold. As the price of gold rises in the international market the value of the gold ETF units also increases. The investor can later sell the units very easily at a higher price than what he bought them for, just like selling shares and book profits. So the price of a unit of gold ETF moves in the same direction as the price of gold in the international market.
Source : Email
