Différence between Gold ETF or Physical Gold

1.

Ownership

• Gold ETF: You don’t own physical gold; instead, you own units that represent gold (usually in dematerialized form).

• Physical Gold: You own real gold, such as jewelry, coins, or bars.

2.

Storage & Safety

• Gold ETF: Stored by the fund house; no risk of theft or need for storage space.

• Physical Gold: Requires safe storage (locker, home, etc.); comes with security and insurance risks.

3.

Purity

• Gold ETF: Backed by 99.5% pure gold or higher.

• Physical Gold: Purity can vary (22k, 24k); risk of impurity if not bought from trusted sellers.

4.

Liquidity

• Gold ETF: Highly liquid; can be traded on stock exchanges during market hours.

• Physical Gold: Less liquid; resale depends on jeweler/buyer and may involve making charges deduction.

5.

Costs

• Gold ETF: Expense ratio (typically 0.5–1% annually) + brokerage.

• Physical Gold: Making charges (up to 10–15%) + GST + storage/insurance costs.

6.

Taxation

• Gold ETF:

  
  

  • Short-term (<3 years): taxed as per income slab.

  • Long-term (>3 years): 20% with indexation.

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• Physical Gold:

  
  

  • Similar tax rules apply.

  • Often harder to prove purchase/sale officially.

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7.

Use

• Gold ETF: Ideal for investment only.

• Physical Gold: Can be used for personal use (jewelry) or gifting.