In August, Gold exchange-traded funds (ETFs) in India witnessed a substantial influx of Rs 1,028 crore, marking the highest inflow in 16 months. Gold ETFs are investment instruments based on gold prices and backed by physical gold of high purity, typically traded on stock exchanges. Each unit represents 1 gram of gold, offering transparent holdings. Exchange Traded Funds (ETFs) are diversified collections of assets, like stocks or bonds, traded on stock exchanges. They provide cost-efficient investment options with lower fees compared to physical gold investments, making them a popular choice for investors seeking exposure to the gold market.
Facts/Terms for UPSC Prelims
- Commodity-Based: Investments tied to the value of a physical commodity, in this case, gold, which can be bought or sold like a stock.
- Passive Investment Instruments: Financial products that aim to replicate the performance of an underlying asset, like gold, without actively managing investments.
- Dematerialized Form: Assets represented electronically rather than in physical certificates, providing ease of trading and ownership.
- National Stock Exchange of India (NSE) and Bombay Stock Exchange Ltd. (BSE): Prominent stock exchanges in India where Gold ETFs are listed and traded.
- Lower Expenses: ETFs generally have lower management fees and operational costs compared to actively managed funds, making them cost-effective for investors.
