For generations, Indian households have trusted gold as a store of value, tucked away in lockers or worn as jewellery. But a quieter shift is underway. More investors, especially younger ones, are choosing to hold their gold in a demat account rather than a vault. Gold ETFs, once a niche product, have become one of the more popular ways to add gold to a portfolio.
Why the shift now
Interest in gold ETFs tends to rise when the economy feels less certain. Inflation worries, a wobbly stock market, or global uncertainty often send investors looking for something steadier. Gold has long played that role, and ETFs make it easier to access without the usual hassles of buying and storing the metal physically.
What a Gold ETF actually is
A Gold ETF is a mutual fund unit that represents physical gold, usually of 99.5% purity, held by the fund house. Each unit roughly tracks the market price of gold, minus a small expense ratio. These units trade on stock exchanges like the NSE and BSE, so investors can buy or sell them during market hours, much like a stock. Well known options in India include Nippon India Gold ETF, HDFC Gold ETF, SBI Gold ETF, ICICI Prudential Gold ETF, and Kotak Gold ETF. Investors can buy them through a demat and trading account, or through platforms such as Zerodha Coin and Groww.
How it compares with other gold options
Physical gold means jewellery or coins, which come with making charges, purity concerns, and the need for safe storage. Digital gold, sold through apps and payment platforms, lets people buy small amounts of gold that a provider stores on their behalf, but these platforms are not regulated by SEBI or RBI. Sovereign Gold Bonds, issued by the RBI, offer a fixed interest along with gold price returns, but new issues have been paused. Gold mutual funds invest in gold ETFs and related instruments, and unlike ETFs, they don't require a demat account, though they usually carry a somewhat higher expense ratio. Gold ETFs sit in between, offering the price transparency of the metal without the paperwork of a bond or the storage risk of physical gold.
The upside and the fine print
Gold ETFs are easy to buy and sell, cost little to maintain, and skip storage worries entirely. They also make it simple to invest small amounts and track value at any time through the fund's daily NAV. On the risk side, returns move with gold prices, which can be volatile in the short term, and liquidity depends on trading volumes for that particular ETF. On taxation, for units bought on or after April 1, 2025, gains from units held over 12 months are taxed as long-term capital gains at 12.5% without indexation, while gains from units held for a shorter period are taxed at the investor's income slab rate. Units bought earlier follow a different holding period rule, so investors sitting on older units should check the applicable timeline before selling.
Who they suit
Gold ETFs work well for investors who want gold exposure without physical ownership, prefer flexibility over a bond's lock-in period, and already use a demat account for other investments. As with any investment, individual circumstances vary, and this piece is not a recommendation to buy or sell any particular fund.
