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Which is better investment in Gold? e-Gold vs Gold ETF

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Before investing in Gold, one should carry out comparative study on Gold ETF and E-Gold. Both are the two best investment in Gold in India. There are very little differences among the two. Both these products score very heavily when compared with Gold coin, Gold funds, Gold fund of funds, Ornaments etc.... The choice is limited to these two. Between the two, one should do detailed study. Both of these products have their own merits and demerits. Differences are very little. Still we can point out a few. Now we are going to do the comparative study of Gold ETFs and E-gold.

 

Parameters

E-Gold

Gold ETFs

1

What is?

E-gold is the dematerialized electronic units of Gold

Gold units are units representing Gold in dematerialized or physical form

2

Who run it?

National Spot Exchange limited

Various mutual funds own Gold ETFs and are listed in stock markets

3

How many?

E-Gold only (No permutation)

11 Gold ETFs run by 11 mutual funds

4

Where to buy?

From the online trading platform run by NSEL

From stock markets like NSE and BSE

5

Unit of purchase

1 gm

0.5 gm in Quantum gold ETF to 1gm in others

6

Physical delivery

as low as 8gm. 15 cities where you can take delivery

Mumbai only. Physical delivery of minimum of 1 kg.

7

Demat account

Separate demat account with NSEL

Same demat account used for stock markets

8

Wealth tax

yes

No

9

Long term capital gain tax

After one year

After 3 years

10

Short term capital gain tax

Before one year

Before 3 years

11

Liquidity

More or less same

More or less same when compared with leaders like GOLD BEES

12

VAT and Sales tax

No

No

13

Purity of Gold

99.5

99.5

14

Intra day trading

Yes

Yes

15

Trading session

10.00 am to 11.30 pm

9.00 am to 3.30 pm

16

Charges

1) Rs.10 per lakh as turn over charge

2) 60 Paisa per unit of e-gold per month as storage charge

3) Brokerages.

4) Transaction charge of Rs.1 per gram

5) Almost nil recurring expense

1) Brokerages

2) Annual recurring expense ranges from 1 to 2 %

3)Transaction charge of Rs.1 per gram

17

Price as on 17/03/2010

1700.80

1648.40

18

Price as on 24/10/2011

2714.40

2584.80

19

Return

59.60%

56.81%

20

Comparative price

Indian Gold price

International gold price

21

Impact cost

10 to 20 paisa

Rs. 4 to 5

 

Upon comparing the two, we can find out that there are fewer differences among the two. E-gold scores over gold ETFs in trading hours and expenses. Whereas Gold ETFs has lot of choices and competition and selection for the investors to choose from. Although some Gold ETFs have less liquidity in the exchanges, investors have the option of 3 to 4 Gold ETFs which are having good volume in the stock exchanges. With e-Gold, liquidity is not at all a problem. Volume of e-gold is picking up fast. Tracking error is almost nil with E-gold. Whereas in gold ETFs tracking error and expense ratio and impact cost come into play. Lastly, e-Gold is better investment in Gold than gold ETF in respect of less expenses, no tracking error, less impact costs, more liquidity, extended trading hours. But these differences combined make to return percentage gap of 2 to 3% between e-gold and gold ETF. Above said are the reasons behind the increased return percentage for e-Gold when compared with Gold ETFs in India

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