E-Gold Compared with Gold ETF

Sep 22, 2011     Posted under: Investment






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Although investing in gold electronically through ETFs is recommended. However, these ETF units are intangible i.e, can only be traded. But with e-gold facility provided by the National Spot Exchange, it is easy to convert units of gold into physical form.

What is E-Gold? One need to have a demat account to trade E-Gold. The delivery is done in T+2 cycle, if you buy on Monday the delivery is done on Wednesday. Small units in the multiple of 1gm can be bought at the market price.

Advantages of E-Gold: Suppose you have accumulated 50gm of gold over a period time. You can visit any of the National Spot Exchange centers present in 15 cities and convert the same into physical gold. You can also visit any of the designated jewellery shop and get the amount of gold.

How secure is E-Gold? It is a secured way of investing as a unit is only sold if physical gold is lying in the vault. Also, though buying e-gold is like buying physical gold, one need not worry about storing it.

E-Gold Compared with ETF:ETFs can be bought and sold on exchanges in paperless format but you cannot convert them into physical gold, unlike e-gold. Also since ETFs involve charges such as management fee, which e-gold does not attract, actual returns are higher.

However, the tax treatment of e-gold makes it expensive than ETFs. While short-term capital as per the normal tax slab, to qualify as long-term capital you need to hold e-gold for three year unlike ETFs which qualifies in a year. Also there is a delivery charge attached with the product.

NitiN Kumar Jain

Nitin works in an IT MNC professionally but blogs and owns NKJ Live. He is also the co-owner of a professional start-up ARGHAM BYTES

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