ValuePickr Forum

The best Gold ETF for long term

Though Indian equities prospects are bright down the line for many years, there is a lot of uncertainty in the World economy going ahead and we could see lot more turbulence in near future. So again Gold may become a safe haven for the investors with a significant allocation way above the conservative share of 5-10%. Considering ETF is the best route to invest in gold through monthly SIP, Which is the best Scheme for 15-20 years? There are plenty of schemes in the market right from Goldman Sachs Gold Exchange traded scheme to Axis, Birla Sun Life, Canara Robeco, HDFC, ICICI Pru, Kotak, Quantum, R Shares (of Reliance MF), Religare Invesco, SBI Gold ETFs etc. Which one is best in terms of liquidity, expenses and ease in transaction?

Dear Mr Ramven,

I have invested in GOLDMAN SACHS GOLD BEES last year. However, the main problem which I had observed that there is a huge gap between the market price of the gold and NAV. As a result, I am not able to sell at a time when the market price is high.

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As far as I know, the selection of Gold ETF should be based on the expense ratio. Other parameters matters, but not much.
I’m invested in GOLD BEES (from the launch) and RELGOLD.

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Bought some GOLDBEES as a hedge; will continue to add as NIFTY continues to rise. Everyone is highly positive on stocks post GST…makes me very nervous. :confounded::sweat:

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With the introduction of Sovereign GOLD Bonds by GOI, it is much better to buy them instead of Gold ETF as there is no expense and also there is interest @ 2.75% pa on these bonds. If you buy in the subscription stage and hold till maturity, you also get tax exemption. Keep and eye for new trenche or you can buy on NSE platform.

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Sovereign Gold Bond is illiquid and very long-term investment, not a short-term hedge. SGB is “the gold and the govt.” When markets go haywire, gold has a good track record, but govts don’t. China in 2015 is the most recent example. If I weren’t so lazy, I would go out and buy physical gold instead of GOLDBEES.

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SGB are easier to subscribe and hold it in demat account. Government also pays 2.5% interest.

Also it saves a lot of foreign currency exchange. They are traded in NSE/BSE as well and can be sold before 8 years.

The major benefit i see is you will not be loosing it (hope u got :slight_smile: :)) & need not go out and look for storage’s/bank lockers (yearly fees + mandatory deposit).

I agree Indians love physical gold . Over a period of time shifting may happen to digital.

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I ended up buying both SGB and GoldBees. Both are doing well as long-term investment/hedge. All gains in Gold have been offset by losses in my other two big investments — BSE and Lupin. Last equity investment in Feb-2018. Still waiting for bargains…

in gold ETF MF will charge u some amout for expenses where as SGB u will get market price and no expenses.

From where do we buy SGB? Are they traded like stocks on NSE/BSE and can we buy them from any trading platform like ICICI Direct/HDFC/Kotak etc?

its on normal capital market segment of NSE and BSE. like u buy shares u can buy SGB from market. u can check rates here for just your quick refrence
https://www.nseindia.com/live_market/dynaContent/live_watch/equities_stock_watch.htm?cat=SGB

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Some points to consider before buying SGB.

I understand SGB are not backed by actual gold buying by the government or RBI, but since they are guaranteed by the government of India, this should not be an issue.

Best part of SGB is that you get fixed amount of interest every 6 months in the account against Mutual funds who charge expenses… The interest does not vary with current gold price but was fixed when the issue was floated (and this amount does not change over the life of bond).

Regarding redemption, at the expiry of the period you do not get the physical gold. Each unit is equivalent to 1 gm gold. One will get 3 day average price of gold as per IBJA (http://www.ibjarates.com/). Going as per current prices of SGB & Gold, you are buying gold bond at about 5-7% discount, should you hold the bond till maturity, this discount should disappear.

Disc: Invested

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Every month RBI issued SGB at fixed rate. Last they issued in august 5-9.next is expected in September 1st week.

You can apply for it in any bank Internet banking site.

You can also hold in demat form.

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I also applied in august got the e-certificate and received in demat format as well.

Was studying gold and it’s various options on how to invest in the commodity.

I believe gold can be considered as an investment, portfolio hedge or for consumption. Detailed thoughts enclosed.

Gold as an investment.docx (38.2 KB)

PS: Invested in HDFC gold ETFs as an investment

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Sovereign Gold Bond Scheme 2019-20 Series-IV - Issue Price is open now for subscription
period September 04 - September 06, 2019

It’s not available for buying in the secondary market at all brokers. For e.g. ICICIDirect allows you to sell SGB in the 2nd market (SGB you have bought from the Govt through ICICIDirect). However, ICICIDirect doesn’t allow you to buy SGB in the 2nd market - however, most other brokers allow it.

Another thing is that the 2nd market is not very liquid. Irrespective of whether you are buying or selling, there are not that many people who are present at the opposite end - so it will take you some patience but it’s totally worth it. You will be about to buy it at a discount to whatever is the current price as sold by the Govt. Last Oct/Nov, I bought it Rs. 2850 - I think at that time, Govt was selling it at much more.
Right now, you would able to buy these same older SGBs in the secondary market at somewhere between 3700 to 3800 per unit.

I am planning to hold whatever I purchased last year it till maturity (I bought 4 separate series from the 2ndary market - all of them mature in 2024 - I bought the 2016 series bonds - maturity is 8 years). However, you can sell it back to the govt after 5 years - so I can possibly sell it in 2021.

Several older SGBs give 2.75% interest rather than the 2.5% currently. However, since the interest depends on the face value of the SGB rather than the current price, this may not be an advantage. All the SGBs I bought from the 2ndary market give 2.75%

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ICICI allowes to sell only those SGB which are purchased from them may be because they get brokerage on purchase and on sell also.
But buying from market is cheaper if u are buying small quantities .

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Dear gold investors, @msiva, @mylu, @varun037

Any idea how these gold ETFs calculate price. I see big difference between SGB and ETFs NAV.
Also which ETF has the lowest tracking error?

SGB opened for October 2019

https://m.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=48329