Introduction: Why Consider Gold ETFs for Investment?

Gold has long held a special place in Indian households, not just as jewellery, but as a trusted store of value during times of financial uncertainty. Whether it's inflation, currency depreciation, or geopolitical tension, gold has consistently acted as a hedge against economic shocks.

But while physical gold is culturally familiar, it comes with practical challenges: storage risks, making charges, lack of liquidity, and concerns about purity. For modern investors looking for a smart and seamless way to invest in gold, Gold ETFs (Exchange Traded Funds) offer a compelling alternative.

What Are Gold ETFs?

A Gold ETF is a mutual fund that invests in 99.5% pure gold and is traded on stock exchanges just like shares. Each unit of a Gold ETF typically represents 1 gram of gold, and its price moves in line with domestic gold prices. This means you can invest in gold with full transparency, no storage hassle, and better liquidity.

In recent years, Gold ETFs have emerged as one of the safest and most efficient gold investment options in India. According to AMFI, the total Assets Under Management (AUM) of Gold ETFs crossed ₹25,000 crore in 2024, with retail participation increasing sharply, especially among salaried professionals and millennials.

How Gold ETFs Work?

A Gold ETF is a type of open-ended mutual fund that tracks the domestic price of physical gold, typically with a purity of 99.5% or higher. Each unit of a Gold ETF usually represents 1 gram of physical gold, though this may vary slightly across AMCs.

The fund houses purchase and store this gold in secure, insured vaults, managed by custodians and overseen by a trustee, ensuring that every unit is backed by actual gold holdings. The gold is held in accordance with regulatory guidelines issued by SEBI and is regularly audited for quality and quantity.

Key Features of Gold ETFs

Unlike physical gold, where concerns around purity, making charges, theft, and liquidity often arise, Gold ETFs offer an investment vehicle that is:

• Highly liquid: Tradeable during market hours

• Pure: Backed by 99.5% certified gold

• Transparent: Daily NAV updates

• Cost-effective: No making charges or storage costs

• Regulated: SEBI oversight ensures investor protection

Accessibility and Minimum Investment

Unlike sovereign gold bonds that have a minimum investment of 1 gram but with limited purchase windows, Gold ETFs allow investors to buy even a single unit, often equivalent to 1 gram of gold. As of 2025, with gold trading around ₹6,300/gram, an investor can begin investing in Gold ETFs with as little as ₹6,300 plus brokerage charges.

Top 5 Gold ETFs in India (2025)

Here are the best Gold ETFs in India, selected based on their fund size, expense ratio, historical performance, and alignment with domestic gold prices:

1. Nippon India ETF Gold BeES

Nippon India's Gold BeES remains the undisputed leader in the gold ETF space. As of May 2025, it boasts an AUM of ₹20,835 crore, making it the largest in terms of scale. Its five-year CAGR has averaged around 14.6%, with a one-year return of 36.5%—nearly mirroring gold's domestic price rise.

Key Details:

• AUM: ₹20,835 crore

• Expense Ratio: 0.80%

• 5-year CAGR: 14.6%

• 1-year Return: 36.5%

The expense ratio stands at 0.80%, above average—but its high liquidity, consistent performance, and nearly zero tracking error justify this premium.

2. HDFC Gold ETF

HDFC's entry in the gold ETF category has quickly scaled to ₹9,845 crore AUM by 2025. Its five-year CAGR is slightly higher than BeES at approximately 14.8%, while delivering similar yearly returns (~36%).

Key Details:

• AUM: ₹9,845 crore

• Expense Ratio: 0.59%

• 5-year CAGR: 14.8%

• 1-year Return: ~36%

With an expense ratio of 0.59%, it offers a good balance between cost and performance, backed by the credibility of a top-tier fund house.

3. ICICI Prudential Gold ETF

Among our top picks, ICICI Prudential's Gold ETF stands out with the lowest expense ratio at only 0.50%. Its AUM, while smaller at ₹7,295 crore, is still substantial enough for good liquidity.

Key Details:

• AUM: ₹7,295 crore

• Expense Ratio: 0.50% (lowest in category)

• 5-year CAGR: 14.3%

• 1-year Return: 36.5%

For fee-conscious investors aiming to optimize net returns, this ETF offers clean, cost-effective exposure with solid performance.

4. SBI Gold ETF

SBI Gold ETF, supported by the country's largest public-sector bank, holds ₹8,010 crore in assets under management. Its five-year CAGR aligns with peers at around 14.6%, and the one-year return stands slightly above them at 36.7%.

Key Details:

• AUM: ₹8,010 crore

• Expense Ratio: 0.73%

• 5-year CAGR: 14.6%

• 1-year Return: 36.7%

Its strengths lie in institutional credibility, consistent tracking, and widespread distribution, ideal for cautious investors valuing stability and trust.

5. Axis Gold ETF

Axis Gold ETF rounds out our list with a smaller AUM of ₹1,710 crore but strong credentials. Its five-year CAGR is approximately 14.8%, and one-year returns are around 37%, both slightly ahead of peers.

Key Details:

• AUM: ₹1,710 crore

• Expense Ratio: 0.54%

• 5-year CAGR: 14.8%

• 1-year Return: 37%

• Tracking Error: 0.22% (one of the lowest)

For investors who prioritize accuracy and efficiency, even in a smaller fund, Axis Gold ETF presents a compelling choice.

Key Advantages of Gold ETFs

1. No Storage Hassles or Insurance Costs

One of the most immediate advantages of investing in Gold ETFs is the complete elimination of storage hassles and insurance expenses. Physical gold requires secure vaults or lockers, which come at a recurring cost. According to RBI data, bank locker charges range from ₹1,500 to ₹10,000 annually, depending on the bank and location.

Gold ETFs are held electronically in your demat account, with no physical handling involved. This digital format ensures that investors avoid purity concerns, making/wastage charges, and the risk of theft.

2. Real-time Pricing and Transparency

Gold ETFs are priced based on the real-time domestic market price of 99.5% pure gold. The Net Asset Value (NAV) of each ETF is updated daily by the fund house and reflects the true market value of the gold held, adjusted for expenses.

This transparency is a significant edge over physical gold purchases, where jewellers may charge premiums of 8–15% over market price due to making charges and markups.

3. Full Regulatory Protection

Gold ETFs in India are fully regulated by the Securities and Exchange Board of India (SEBI), ensuring investor protection, standardised disclosures, and high governance. SEBI mandates that each unit of a Gold ETF be backed by actual 99.5% pure physical gold, stored securely with third-party custodians.

4. High Liquidity

One of the standout features of Gold ETFs is their high liquidity. Unlike physical gold, which may involve delays and price haggling at the time of sale, Gold ETFs can be traded instantly on the NSE or BSE during market hours using a regular brokerage and demat account.

Data from AMFI shows that the daily average turnover of Gold ETFs on Indian exchanges increased by 53% in FY2023–24, indicating growing retail and institutional participation.

5. Portfolio Diversification Benefits

Gold has historically served as a safe-haven asset, especially during times of economic uncertainty. During the 2008 global financial crisis, gold prices rose by over 25% while equity markets crashed. Since gold often has a low or negative correlation with equities, it acts as an effective inflation hedge and shock absorber during market stress.

Gold ETFs vs Other Gold Investment Options

Gold ETFs strike the right balance between liquidity, safety, and transparency. They are especially ideal for short-to-medium-term investors who want to tactically allocate to gold and retain the flexibility to exit anytime.

How to Invest in Gold ETFs: Step-by-Step Guide

Step 1: Open a Demat and Trading Account

To begin, you need to open both a Demat account and a trading account with a SEBI-registered stockbroker. Popular platforms like Zerodha, Groww, Upstox, ICICI Direct, and Angel One offer fast, paperless onboarding, often within 24–48 hours using Aadhaar-linked KYC.

Step 2: Choose the Right Gold ETF

Research and shortlist the Gold ETF that aligns with your investment goals. Key factors to evaluate include:

• Expense ratio

• AUM (assets under management)

• Tracking error

• Daily traded volumes

Step 3: Place a Buy Order

Navigate to your broker's mobile app or web dashboard. Enter the symbol of the Gold ETF (e.g., GOLDBEES for Nippon India), specify the number of units, and place a market or limit order. Since Gold ETFs are listed on the NSE and BSE, they can be bought during trading hours (9:15 AM to 3:30 PM).

Step 4: ETF Units Held in Demat Form

Once your purchase is complete, the ETF units will reflect in your Demat account within T+1 or T+2 working days. Your holdings can be monitored on your broker app or CDSL/NSDL portals.

Step 5: Exit Anytime with Full Liquidity

You can sell your units on the stock exchange at market price at any time during trading hours. Once sold, the proceeds are credited to your trading account, typically within T+1 or T+2 days.

Important Considerations

Taxation of Gold ETFs

From a taxation perspective:

• Short-term capital gains (holding period less than 3 years): Taxed as per your income tax slab

• Long-term capital gains (holding period more than 3 years): 20% with indexation benefits

This is the same taxation treatment as physical gold and gold mutual funds—but Gold ETFs offer better liquidity and transparency.

Key Factors to Consider

• Expense Ratio: Lower is better for long-term returns

• Tracking Error: Should be minimal (below 1%)

• AUM Size: Larger funds typically offer better liquidity

• Trading Volume: Higher volumes ensure better price discovery

Conclusion

As we move further into a digitally driven investment era, Gold ETFs stand out as one of the smartest ways to invest in gold. They offer all the benefits of traditional gold—wealth preservation, inflation protection, and portfolio diversification—without the physical burden of storage, purity concerns, or liquidity issues.

What makes them particularly attractive in 2025 is the ease of access: they can be bought and sold as easily as stocks, are regulated by SEBI, and require no large capital outlay—one unit equals just one gram of gold. Whether you're a millennial starting your investment journey or a seasoned investor rebalancing your portfolio, Gold ETFs provide low-cost, high-liquidity exposure to gold without the emotional or logistical baggage that physical gold often carries.

For the modern investor, especially those looking to hedge equity market risk or add defensive depth to their portfolio, Gold ETFs strike an ideal balance between safety, transparency, and flexibility. It's a small step that can bring long-term stability to your portfolio, backed by the timeless value of gold, delivered through the convenience of digital investing.