As of May 16, 2025, gold prices have experienced a notable decline, with spot gold trading around $3,213.56 per ounce, marking a 3.3% weekly drop—the steepest in six months.
This downturn is attributed to a strengthening U.S. dollar and easing U.S.-China trade tensions, which have diminished gold’s appeal as a safe-haven asset.
In India, gold prices have also retreated from April’s record high of ₹99,358 per 10 grams to approximately ₹92,900, leading to increased consumer demand and dealers offering discounts up to $34 per ounce.
Given this context, investors are considering whether this price dip presents a strategic opportunity to invest in Gold Exchange-Traded Funds (ETFs).
Understanding Gold ETFs
Gold ETFs are investment funds traded on stock exchanges, much like stocks, that aim to track the price of gold. They offer investors a way to gain exposure to gold prices without the need to physically hold the metal. In India, the popularity of gold ETFs has surged, with holdings increasing over 200% in the past five years, rising from around 21 tonnes to over 63 tonnes.
Current Market Dynamics
1. Price Correction and Demand Surge
The recent decline in gold prices has spurred demand across key Asian markets. In India, the price pullback has rejuvenated gold buying interest, with dealers offering significant discounts and consumers taking advantage of the lower prices.
2. Investor Sentiment
Despite the price drop, investor interest in gold ETFs remains strong. In February 2025, inflows into gold ETFs surged by 98.54% year-on-year, reaching ₹1,979.84 crore . This indicates that investors view the current price levels as a buying opportunity.
3. Expert Opinions
Financial advisors suggest that while gold has delivered decent returns this year, similar performance may not continue.However, its importance in balancing risk remains vital. Allocating 10-12% of your portfolio to gold can enhance risk-adjusted returns.
Which Gold ETF is best in India (As of April 2025)
| ETF Name | 1-Year Return (%) | 5-Year CAGR (%) |
| HDFC Gold Exchange Traded Fund | 29.85 | 14.83 |
| ICICI Prudential Gold ETF | 29.53 | 14.80 |
| Nippon India ETF Gold BeES | 29.06 | 14.79 |
| SBI Gold ETF | 29.46 | 14.05 |
| Kotak Gold ETF | 29.45 | 13.68 |
These ETFs have demonstrated strong performance, making them attractive options for investors seeking exposure to gold.
Investment Strategy Recommendations
1. Systematic Investment Approach
Rather than making lump-sum investments, consider a staggered investment strategy, similar to systematic investment plans (SIPs). This approach helps mitigate the risk of market volatility and allows for cost averaging over time.
2. Portfolio Diversification
Gold should not be viewed solely as a return-oriented asset class. Instead, it plays a crucial role in portfolio diversification. Allocating a portion of your portfolio to gold can enhance risk-adjusted returns and provide a hedge against market downturns.
3. Tax Considerations
Investing in gold ETFs offers several tax advantages. The income earned from gold ETFs is classified as long-term capital gains if held for a year, taxed at 12.5% with indexation. Additionally, gold ETFs are exempt from various taxes that apply to physical gold, including wealth tax, VAT, and Securities Transaction Tax (STT).
Can I Sell Gold ETFs Anytime? A Detailed Guide for Indian Investors
Yes, you can sell Gold ETFs (Exchange Traded Funds) anytime during market hours, just like regular shares. However, understanding how the process works and the implications involved will help you make more informed decisions.
Key Facts About Selling Gold ETFs in India
Liquidity & Trading Hours
- Gold ETFs are listed and traded on stock exchanges such as the NSE (National Stock Exchange) and BSE (Bombay Stock Exchange).
- You can buy or sell them anytime between 9:15 AM and 3:30 PM IST, Monday to Friday (excluding market holidays).
- Transactions require a Demat and trading account with a registered stockbroker (e.g., Zerodha, ICICI Direct, HDFC Securities, etc.).
How Selling Works
- Place a Sell Order: Log into your trading platform, enter the number of units you want to sell, and choose between a market or limit order.
- Execution and Settlement: Once executed, the trade settles in T+1 or T+2 working days (varies by broker and exchange).
- Funds Transfer: After settlement, the proceeds from your sale are credited to your linked bank account or trading wallet.
Market Price vs NAV
- Gold ETFs are traded at real-time prices determined by market demand and supply.
- These prices may differ slightly from the fund’s Net Asset Value (NAV) due to trading premiums or discounts.
- It’s wise to compare the live market price with the latest NAV before executing a trade.
Tax Implications on Selling Gold ETFs
- Short-Term Capital Gains (STCG): If held for less than 3 years, gains are taxed according to your income tax slab.
- Long-Term Capital Gains (LTCG): If held for 3 years or more, gains are taxed at 20% with indexation benefits.
- Gold ETFs are not subject to GST, VAT, or wealth tax, unlike physical gold.
Minimum Quantity
- You can sell even a single unit of a Gold ETF.
- Typically, one unit represents 1 gram of gold, though this may vary slightly between fund houses.
Potential Risks Before Selling
- Market Volatility: Gold prices are sensitive to global economic shifts, interest rates, and geopolitical events.
- Bid-Ask Spread: Low-volume ETFs may have wider spreads, which could impact sale prices.
- Liquidity Risk: While most Gold ETFs are liquid, some lesser-known funds might experience low trading volumes, delaying execution.
Expert Tip
Use limit orders instead of market orders when selling in volatile markets to ensure price protection. Also, keep an eye on trading volumes to avoid delays in execution.
What Were Sovereign Gold Bonds (SGBs)? How Are They Different from Gold ETFs?
Sovereign Gold Bonds (SGBs) and Gold Exchange-Traded Funds (ETFs) have been two of the most prominent non-physical gold investment avenues for Indian investors. However, it’s important to note that as of 2025, SGBs are no longer being issued by the Reserve Bank of India (RBI), making Gold ETFs the more accessible option for new investors.
| Feature | Sovereign Gold Bonds (SGBs) | Gold ETFs |
| Issuer | RBI (Government of India) | Asset Management Companies (Mutual Funds) |
| Returns | Gold price appreciation + 2.5% fixed interest | Only gold price appreciation |
| Tax on Gains | Tax-free if held till maturity (8 years) | LTCG taxed at 20% with indexation |
| Liquidity | Moderate; tradable on exchanges but less liquid | High; real-time trading on stock exchanges |
| Tenure | 8 years (exit after 5 years allowed) | No lock-in; can sell anytime during market hours |
| Form | Issued in Demat or certificate form | Held in Demat account |
| Expenses | No expense ratio; no storage cost | Expense ratio (0.25–1% approx.) applies |
| Suitability | Long-term investors seeking tax-free returns | Short to medium-term investors valuing liquidity |
| Price Tracking | Based on RBI’s fixed gold rate methodology | Tracks domestic gold spot prices |
Conclusion
The recent decline in gold prices presents a potential opportunity for investors to consider gold ETFs as part of a diversified investment portfolio. Given the strong performance of gold ETFs in India and the current market dynamics, a systematic and diversified investment approach can help mitigate risks and enhance returns. As always, investors should assess their individual financial goals and risk tolerance before making investment decisions.
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