We Indians have an unexplainable attraction and affinity to accumulate gold. We have certain emotional and consumption value rather economical value that we attach to it. We buy gold on various occasions like marriages, birthdays, akshay tritiya, Diwali or for the simple reason that the cost of gold has come down. Gold passes on in generations. It is an instrument of reminiscence.
Though this noble metal has lost its vigour but it is still recommended by financial experts to invest 5-7% of your monthly income because gold is considered as a hedge against inflation and it also act as a medium of exchange during economic crisis.
E-Gold Vs Gold ETF
There are many options that are available to prospective investor to make an investment in gold via investing in physical gold, gold coins and Gold Bars, Electronic Gold, etc. Below are some distinguishing factors of e-gold and gold Etf’s and their pros and cons.
- No Additional Charges : The biggest advantage that E-gold has over Gold ETF is that it does not involve any management costs or other recurring expenses. So this product is more cost effective to those who have long term investment as their goal. The only charges that are involved in E-Gold is one time transaction fee and a brokerage fee and both these payments are also charged under Gold ETF’S, but are much higher.
- Convert to Physical Gold : E-gold can be converted to physical form but its re-materialization is only possible when the minimum quantity of converting is fixed at 8 grams. Gold-ETF’s can be converted to yellow metal only when it exceeds a size of 500g to 1 kg.
- Different Timings for trading: E-gold is traded in NSEL on weekdays from 10 a.m. to 11:30 p.m. Gold ETF’S are traded only till 3:30 p.m.
- Tax treatment: Tax treatment is different for both these instruments. E-gold attracts wealth tax on the other hand Gold ETF’s are treated as mutual funds and hence are tax free. Besides, for Gold ETF’s 1 year is considered to be Long Term Capital Gain while for E-gold Long term Capital Gain is when a period of three years is over.
- Tracking Prices: Net Asset Value is assessed in the case of Gold ETF’s which is amenable to changes as and when the prices fluctuate or change whereas in E-Gold you have can directly track the gold prices.
- Demat Account: A Demat Account is required to make an investment in E-Gold on the other hand anyone can invest in Gold ETF’s even if they don’t have a Demat Account.
- Liquidity : Liquidity in E-Gold has seen a phenomenal increase. And liquidity is considered to be one significant attribute that is required by a retail investor.
When prices of gold fall they beacon buyers to purchase this yellow metal at considerably lower rates. Gold ETF’S are mutual funds that invest in physical gold of 99% purity. E-Gold is an electronic method of buying gold; it offers gold in physical as well as in electronic form.
