Budget 2024-25 has put gold ETFs a step ahead of gold mutual funds. The threshold to claim long-term capital gains is one year, while for gold mutual funds it has been fixed at two years. Gold BeES by Nippon India Mutual Fund is Indiaâs largest gold ETF
Dhuraivel Gunasekaran
July 29, 2024 / 15:17 IST
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Gold ETFs are passively managed mutual fund schemes investing in standard gold bullion of 99.5 percent purity. They track the domestic price of gold closely. Gold mutual funds, on the other hand, are fund of funds (FoFs) that invest in gold ETFs.
Currently, there are 17 Gold ETFs. Nippon India ETF Gold BeES (Gold BeES), a MC30 pick, scores on all the parameters, including higher liquidity in the exchanges and lower tracking error.
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Budget 2024 has made it clear that Gold ETFs are brought under the capital-gain regime. Arun Sundaresan, Head, ETF, Nippon Life India AMC, says, âSince gold ETFs are listed on exchanges, investors can now avail of long-term capital gain (LTCG), if the asset is held for 12 months. This will be applicable for transactions from April 1, 2025, onwardsâ.
Short-term capital gain (STCG) would be taxed at the applicable slab rate. On the other hand, since gold FoF are not listed, investors can claim LTCG, if they've held the asset for two years, adds Sundaresan.
Another big move in the Budget was a reduction on the basic customs duty on gold and silver from 10 percent to 6 percent and Agriculture Infrastructure & Development Cess (AIDC) from 5 percent to 1 percent. It will effectively reduce the overall taxes on gold from around 18.5 percent (including GST) to 9 percent.
Chirag Mehta, CIO, Quantum AMC, says that this could lead to a commensurate decline in gold prices. âFor investors who owned gold, this reduces their returns to that extent. But for investors who have yet to allocate to gold, this provides an opportunity to allocate at much lower gold prices due to the reduction in dutiesâ, Mehta adds.
Also see: Gold rewards investors. But donât go overboard, itâs just an asset allocator
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As an asset class, gold has done exceedingly well over the last few years. The gold ETFs category has delivered a compounded annualised return of 13 percent in the last one year.
Factors that drove gold prices include buying by more central banks, geopolitical uncertainties, moderating US retail inflation numbers and anticipation of a less aggressive US Federal Reserve.
Some catalysts that could push gold prices back up are a weak dollar, festive time demand, US elections, geopolitical risk and central bank policies, points out Jigar Trivedi, senior commodities analyst, Reliance Securities.
Gold may not be an outperforming asset class all the time but it is a hedge against market uncertainties and a useful portfolio diversifier. It can account for 5-10 percent of your portfolio at any point of time.
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See Also
Nippon India ETF Gold BeESGold BeES scores on all counts. Liquidity or the trading volume plays an important part in ETF selection to buy and sell at the right prices. The average daily total volume traded in Gold BeES on the NSE over the last one year was Rs 31 crore, the highest among Gold ETFs.
Also see: Has budget â24 put gold ETFs at an advantage over gold mutual funds?
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Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Also see: Explained in charts: The spectacular rise of Gold ETFs and what lies ahead
Dhuraivel Gunasekaran
Tags: #Gold #gold BeES #gold ETF #invest #Mutual Funds #personal finance
first published: Jul 29, 2024 01:12 pm
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