Are Gold ETFs losing their glitter? (2024)

FAQs

Why are gold ETFs dropping? ›

With domestic gold prices sliding following the sharp cut in Customs duties announced in the Budget, the net asset value (NAV) of gold exchange-traded funds (ETFs) took around a 5 per cent hit on Tuesday.

Gold ETF is a good option to invest in the yellow metal. Gold ETFs are passively managed mutual fund schemes traded on the NSE and BSE, just like equity shares. Investors can buy and sell them at any time during market hours, using their demat account.

Downsides of gold ETFs include exposure to counterparty risk, annual fees, and the possibility the fund fails to properly track the price of gold. Another drawback is that you don't physically own the gold.

Can a ETF price go to zero? Yes, if the value of the assets in the ETF go to zero. One of the many benefits of ETFs is that it allows investors to own ETFs and get the diversification benefits of mutual funds, while buying and selling them like stocks.

The ETF shares are therefore not supported by an equivalent amount of physical gold. In the event that the bank or institution issuing the ETF becomes insolvent, then it is very unlikely that its share owners would be able to recoup their investment.

ETFs that track gold can be more cost-effective and they are certainly easier to buy, hold, and sell. If you are looking to invest a little bit each month or with every paycheck, ETFs are an affordable way to implement your strategy.

Gold ETFs: Benefits and Risks. Physical gold is a direct investment, and it's actual gold that you can hold in your hand, such as coins, bars or jewelry. However, gold ETFs are an indirect investment because investors do not take ownership of gold itself.

Which is better, gold ETF or gold BeES? ›

Disadvantages of Investing in Gold BeES

While gold ETFs are easier to buy and sell than physical gold, they might not be as liquid as other financial assets like stocks and bonds, making it harder to trade in large amounts quickly.

As previously highlighted, these funds can offer a way to add gold exposure to a portfolio without the complexities of owning physical metal. Diversification is a common reason for including gold ETFs. Because gold often moves differently from shares and bonds, it can potentially help balance a portfolio's performance.

Gold is often seen as a safe haven investment and a store of value, but as a produced commodity, it is also subject to economic forces like supply and demand. When gold miners produce an excess of gold relative to demand, the price will experience downward pressure.

The company said total tonnes mined from the open pit at its Rainy River mine in Ontario during the second quarter of 2022 were below expectations as flooding in the pit due to unfavourable weather impacted the mining rate, the mine sequencing and access to higher grade ore planned for the second half of this year.

So far in 2024 North American outflows have amounted to US$2.9bn and collective holdings have fallen by 52t, second only to European losses. Nonetheless, driven by recent inflows and the notable gold price strength, the total AUM of North American funds has risen by 14% y-t-d.

As previously highlighted, these funds can offer a way to add gold exposure to a portfolio without the complexities of owning physical metal. Diversification is a common reason for including gold ETFs. Because gold often moves differently from shares and bonds, it can potentially help balance a portfolio's performance.