Explained: All about how gold ETFs give investors the purest yellow metal

Explained: All about how gold ETFs give investors the purest yellow metal

Gold ETFs buy gold of at least 99.5 percent purity according to LBMA standards.





November 09, 2021 / 10:01 AM IST





Did you know that whenever you invest in a gold exchange-traded fund (ETFs), there is physical gold stored, even if you don’t see it?

Gold ETFs are linked to the price of gold. Each unit of a gold ETF is pegged to a certain value of gold. Now, gold ETFs invest and hold physical gold on behalf of investors. Here are many other facets to gold ETFs.

How is gold valued? 

Mutual funds have to follow SEBI’s rules on valuing gold. The value needs to be derived on the basis of prices polled on the London Bullion Market Association (LBMA). These prices then need to be converted to Indian metrics and Indian currency. Further, transportation charges that may be incurred on bringing such gold from London, notional customs duty, taxes and other levies also need to be added to the gold price.

How is the gold stored? Are charges passed onto investors?

SEBI regulations require Gold ETFs to buy gold as per the standards of LBMA. The gold bars must have a purity of at least 99.5 percent