Gold

Parameters	Sovereign Gold Bond	Gold ETF	Gold Mutual Funds	Physical Gold
Issuer	RBI on behalf of GOI	Mutual Funds / Other entities	Mutual Funds	N/A
Who can invest	Individuals, HUF, Charitable Trusts, Universities	Anyone	Anyone	Anyone
Form of Holding	Physical Holding Certificates/ D’mat.	D’mat.	Electronic Form (Statement of Account)	Physical
Min Investment	1 gram	1 gram	Rs.1,000/- (depends upon scheme to scheme)	Any Amount
Max Investment	20kg for institutions & 4kg for all other investors per year	Any Amount	Any Amount	Any Amount
Interest rate	2.50% p.a credited semiannually (Taxable)	N/A	N/A	N/A
Redemption Value	Average of closing price of gold of 999 purity of previous 3 business days from the date of	Gold ETFs are represented by 99.5% pure physical gold bars.	As per underlying value of holding (generally Gold ETF)	Prevaling price of gold
Tenure	Lock-in for 8 years, early redemption from 5th year	No fixed tenure	No fixed tenure	No fixed tenure
Liquidity	Traded on stock exchanges (Only if held in D’mat)	Traded on stock exchanges.	Can be sold back to fund anytime.	Fairly liquid.
Exit Load	N/A	Nil	Applicable between 1-2% for upto 1-3 years.	Nil
Tax	No TDS. Interest is fully taxable. No Capital Gains tax if held till maturity. Capital Gains Tax applicable if	Capital Gains Tax is applicable	Treated as Debt Mutual fund. Capital Gains Tax charged as applicable	Capital Gains Tax is applicable
Impurity Risk	None	None	None	Yes
Pledge	Yes	No	Yes	Yes
Cost of Holding	Nil	Fund Management cost applies. (Generally between 0.50 – 1.00% per year.	(Generally between 0.50 – 1.00% per year. Fund Management cost applies. (Generally between 1.00 – 1.50% per year.	Nil

Should You Invest In Gold?

Wow or Oops!
Let us look at the recent Gold ETF returns..
Returns ( as on 31-May-20)

1 Year	3 Year	5 Year	7 Year
46%	16%	11%	7%

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Source:MFI, Fundsindia Research Returns ( as on 31-May-19)

1 Year	3 Year	5 Year	7 Year
2%	2%	3%	0%

Oops. We need to sell Gold 🙁
Same asset class – but two completely different interpretations!
Note: Returns of Nippon India ETF Gold BeES (largest Gold ETF with AUM above Rs. 3,500 crs) is used for illustration How do we form our return expectations?