What is a gold ETF?

Summary: Curious about why gold ETFs are stealing the spotlight from traditional physical gold? This guide breaks down what gold ETFs are, why they're a smarter (and more tax-efficient) way to invest in gold and how the latest tax rules make them even more attractive for Indian investors looking to add a safety net to their portfolios. In India, gold has long been a symbol of wealth and security. Generations have kept gold coins, bullion, and jewellery in their lockers. While the idea of gold being an investment is rooted in tradition, it is not the most lucrative way to grow wealth. That's why we've always held the belief that it should be looked at as a hedge against market turmoil and inflation. However, gold has been rising in popularity among individual investors and has become a reliable store of value for central banks worldwide. As governments stockpile gold to hedge against fluctuations in fiat currencies, the precious metal has begun its resurgence. That's why we have revised our investment case for this asset, albeit slightly. It should still be viewed as a cushion for your portfolio. Physical gold is still fraught with risks and is an inefficient investment mode. Hence, we introduce you to the concept of gold ETFs, a low-cost and tax-efficient way to invest in this precious metal. So, what is this investment vehicle, and how is it different from the physical form? What is a gold ETF? A gold ETF is a passive investment vehicle designed to mirror the price movements of gold. It achieves this by investing in physical gold or gold-related financial instruments, making it a convenient way to own gold without dealing with the challenges of physical storage. According to SEBI regulations, gold ETFs must maintain at least 95 per cent of their net assets in physica

This article was originally published on December 26, 2024, and last updated on February 04, 2026.