E-gold or ETF: The choice of today’s investor


Digital revolution has penetrated almost every sector of the Indian market, and gold is no different. Ever since the yellow metal was introduced to the world of online trading, physical jewelry has been reserved to the emotional segment of the market. However, with e-gold picking up pace amidst the masses, it is important for the customer to understand which online investment option is better: e-gold or Exchange-Trade Funds (ETFs).

In India, National Spot Exchange Limited (NSEL) offers e-gold, which helps investors to invest in gold, silver, and platinum commodities online. E-gold is held electronically and can be converted into physical gold. ETFs, on the other hand, are similar to mutual funds as one unit represents a certain weight of gold (generally 0.5g or 1g).

The concept of e-gold picked up pace when its returns surpassed that of ETFs in 2012. In addition, net asset value of ETFs includes the deduction of storage charges, company charges, and custodian charges. Comparatively, e-gold can be sold on NSEL easily with considerable profits and minimal extra charges.

Experts at Rajesh Exports, the world’s largest gold processing company expressed that any quantity of e-gold can be converted into physical gold while ETFs can be converted only if its size is more than 500gm. Furthermore, investors track gold prices in the case of e-gold. This is more certain in comparison to the price-dependent asset value studied in ETFs.

However, gold ETF gives e-gold a run for its money in terms of taxes and corresponding returns. For instance, e-gold requires 3 years to qualify for long-term capital gains, whereas ETFs need only 1 year. On the wealth tax front, ETF enjoys exemption due to its status of ‘financial asset’. E-gold doesn’t. Concoction of the aforementioned facts directly impact the amount of total tax applicable and the subsequent purchase price on ETF as well as e-gold.

Purpose of investment, extensive market study, and awareness are going to decide the choice of a market investor as well as the common man. While the debate doesn’t look one-sided, the scales may tip towards one of them as the individual profit figures are revealed at the end of the ongoing financial year.