A Pragmatic View of ‘Physical Gold’ versus ‘Paper Gold’ Scenario in India with Special Reference to Gold ETFs

Abstract

The investment in gold is popularly known as ‘Safe Heaven’ amongst all investment alternatives in India for whom the risk matters. Holding a gold is yet considered as a symbol of wealth and prosperity to the Indians. Moreover, the Indians have special interest and zest in Gold than any other nations in the world. Since last 6 months the gold price is increasing too fast. Average last year’s return in gold around 46% but due to lock down in Covid-19, the demand towards paper gold like Gold ETFs, Gold Derivatives, Sovereign Gold Bonds, Gold Deposit schemes etc. rise around 20% to 25%. Other things of attraction towards Paper Gold are no making charges, no deduction in weight when returned, no fear of theft, easy entry and exit etc. Apart from this, it is to be seen that since last decades the advertisement regarding mutual funds and ETFs have also been surprisingly increased. The term ETF (Exchange Traded Fund) is the now buzz word for the investors who likes to invest their money in the de-materialised form than physical form. In India, the history of Gold ETF was started from the year 2002 by the Benchmark Asset Management Company Pvt Ltd however this proposal got approved by SEBI (Securities Exchange Board of India) on 24th January, 2006. This study is conducted to view pragmatic point on Paper Gold versus Physical Gold. The primary objective of this paper is to find out the facts and figures about the tendency of investors with respect to Paper Gold especially for Gold ETFs in India. This paper also focuses on the topics of mechanism of Gold ETF, attractive and disliking features of Gold ETF and physical Gold, and Comparative study of Gold ETF v/s Physical Gold.