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Here's why Gold ETF scores over Jewelry

[Note: This post has been updated on Feb 24, 2016].

Gold Exchange Traded Fund or ETF (a type of mutual fund that invests only in pure gold) is undoubtedly better than buying gold jewelry… of course, assuming you don't plan to wear it :-)

Therefore, if your objective is to buy gold jewelry for personal use, then you need not bother reading this blog post any further.

However, if you desire to invest in gold for your daughter's marriage, children’s education or your retirement, you would be much better off buying Gold ETFs.


... Because brokerage charges in buying Gold ETFs are negligible at around 0.5-1%. Plus, of course, there would be annual fund management charges of around 1% or even less. In comparison, you will end-up paying around 10-20% as premium and/or making charges when buying jewelry. Clearly, this will severely impact your returns.

... Because Gold ETFs are always bought / sold at the prevailing international prices. On the other hand, price of gold levied in jewelry may include 5-10% margin. Moreover, there is no transparency at all. In fact, you will find the gold price varying even from jeweler to jeweler.

... Because Gold ETFs are of the highest purity and duly certified. Whereas, when buying jewelry you have to trust your jeweler. Even certification may not help. Otherwise, why does a jeweler deduct a certain percentage when you try to sell him gold bought from another jeweler?

... Because you can buy Gold ETFs at the click of mouse or a call to your broker. For buying jewelry, however, you would have to personally visit the jeweler; carrying huge amounts of cash.

... Because no one can steal your Gold ETF. But jewelry, as you are well aware, carries a very high risk of theft.

… Because, jewelry design may get outdated. Replacement of the same with new design will involve substantial expenses as the making charges on old jewelry will be a total loss. Instead, with Gold ETF investment corpus, you can buy the latest designs with no such loss.

For your information
Till recently, Gold ETFs also enjoyed certain tax advantages over gold jewelry: 

- Gold ETF attracted the favourable long term capital gains tax only after one year of investment. But, for jewelry you had to wait for three years, for it to be classified as long term capital gains. Of course, now both need three years for the same.

- Gold ETF was exempt from Wealth Tax; whereas you had to pay Wealth Tax on your jewelry. With the abolition of Wealth Tax, both the jewelry and ETF are now at par.

Concluding, be smart and move to smarter ways of investing in gold.

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