The 5 Best Gold ETFs, Considering Market Cap: Gold ETF Value and Demand?
Value of ETFs on gold
Gold ETFs are also like other exchange traded funds, these are regulated by the SEBI. Gold ETFs will derive their prices from the current market value of gold in a country. The value of this will be derived based on gold prices surveyed by the London Bullion Market Association (LBMA). Later, the rates will be converted to Indian metrics and Indian currency (INR). As India does not produce much gold, the country must therefore import it from foreign markets. Therefore, the national gold rates will further depend on the freight charges, taxes, customs duties, additional levies, etc. Gold ETFs will invest your money in gold that has the highest purity of at least 99.5%.
When investing in Gold ETFs you will be charged an expense ratio just like all other ETFs. This will include the cost of storing and processing physical gold in their vaults. In addition, it will include insurance coverage for your gold investment. In the event of unprecedented calamities, your gold will be safe.
Best Gold ETFs, by Market Cap (MC)
The last traded price of the SBI Gold ETF was around Rs. 4,258.60, and its market cap is around Rs. 325.39 crore. The last traded price of the Invesco Gold ETF was around Rs. 4,305.00, and its market cap is around Rs. 49.20 crore. The last traded price of HDFC Gold ETF was around Rs. 42.62, and its market cap is around Rs. 6.56 crore. UTI – Gold’s last traded price was around Rs. 41.58, and its market cap is around Rs. 5.77 crore. The last traded price of Nippon ETF Gold was around Rs. 41.47 while its market cap is around Rs. 4.25 crore.
Therefore, the SBI Gold ETF has the highest MC and the Nippon ETF Gold has the lowest MC among the gold ETFs mentioned above. However, in terms of returns and market performance, UTI – Gold ETFs have one of the best records among them. Apart from these funds, the Axis Gold ETF has also performed very well, with a market cap of Rs. 3.20 crore.
The importance of market capitalization can be seen when you want to withdraw your position. If you find that gold rates are going down at some point and you can face a lot of losses with gold ETFs, you may not stay in the investment. So if a platform has a better MC, it will be easier for you in the area of liquidity. Hence a company with a better MC, offering more security.
Gold ETF investment amount
The UTI Gold ETF, HDFC Gold ETF, ICICI Prudential Gold ETF, Kotak Gold ETF and Axis Gold ETF will offer investors 0.01 grams of gold per unit of gold ETF. On the other hand, SBI ETF Gold, Invesco India Gold ETF and Aditya Birla Sun Life Gold ETF will offer investors 1.00 grams of gold, per unit of gold ETF. Thus, the prices vary among themselves on a large scale, depending on the amount of gold. You can buy these gold ETFs from mutual fund apps like Groww etc. Additionally, Gold ETF rates will be listed on the BSE / NSE website, and you can buy or sell Gold ETFs at any time through a stock broker.
In addition, gold ETFs are subject to tax. After holding a position in a Gold ETF for more than 3 years, you will be taxed with long term gains at a rate of 20%, with the benefit of indexation. If you withdraw your position in the same investment before 3 years, you will have short-term capital gain.
Gold ETF application
Gold prices, over the past year, have reached new highs, while the precious metal has failed to maintain the same position. So, with falling gold prices, investors have shown increased demand. This has certainly had a positive impact on gold ETFs, as well as gold jewelry. October was the holiday season in India, and this period each year shows increased demand for the metal. According to the latest data available, gold ETFs attracted around Rs. 303 crore in October this year. Additionally, in a report titled “Global Gold-Backed ETF Flows – November 2021,” the World Gold Council mentioned: The first month of positive flows since July. Inflows to North America and Europe greatly exceeded outflows from Asia, which experienced negative flows for the first time since May.
(Data up to December 29, 2021)