Which is better investment in Gold? e-Gold vs Gold ETF

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Before investing in Gold, one should carry out comparative study on Gold ETF and E-Gold. Both are the two best investment in Gold in India. There are very little differences among the two. Both these products score very heavily when compared with Gold coin, Gold funds, Gold fund of funds, Ornaments etc.... The choice is limited to these two. Between the two, one should do detailed study. Both of these products have their own merits and demerits. Differences are very little. Still we can point out a few. Now we are going to do the comparative study of Gold ETFs and E-gold.

 

	Parameters	E-Gold	Gold ETFs
1	What is?	E-gold is the dematerialized electronic units of Gold	Gold units are units representing Gold in dematerialized or physical form
2	Who run it?	National Spot Exchange limited	Various mutual funds own Gold ETFs and are listed in stock markets
3	How many?	E-Gold only (No permutation)	11 Gold ETFs run by 11 mutual funds
4	Where to buy?	From the online trading platform run by NSEL	From stock markets like NSE and BSE
5	Unit of purchase	1 gm	0.5 gm in Quantum gold ETF to 1gm in others
6	Physical delivery	as low as 8gm. 15 cities where you can take delivery	Mumbai only. Physical delivery of minimum of 1 kg.
7	Demat account	Separate demat account with NSEL	Same demat account used for stock markets
8	Wealth tax	yes	No
9	Long term capital gain tax	After one year	After 3 years
10	Short term capital gain tax	Before one year	Before 3 years
11	Liquidity	More or less same	More or less same when compared with leaders like GOLD BEES
12	VAT and Sales tax	No	No
13	Purity of Gold	99.5	99.5
14	Intra day trading	Yes	Yes
15	Trading session	10.00 am to 11.30 pm	9.00 am to 3.30 pm
16	Charges	1) Rs.10 per lakh as turn over charge 2) 60 Paisa per unit of e-gold per month as storage charge 3) Brokerages. 4) Transaction charge of Rs.1 per gram 5) Almost nil recurring expense	1) Brokerages 2) Annual recurring expense ranges from 1 to 2 % 3)Transaction charge of Rs.1 per gram
17	Price as on 17/03/2010	1700.80	1648.40
18	Price as on 24/10/2011	2714.40	2584.80
19	Return	59.60%	56.81%
20	Comparative price	Indian Gold price	International gold price
21	Impact cost	10 to 20 paisa	Rs. 4 to 5

 

Upon comparing the two, we can find out that there are fewer differences among the two. E-gold scores over gold ETFs in trading hours and expenses. Whereas Gold ETFs has lot of choices and competition and selection for the investors to choose from. Although some Gold ETFs have less liquidity in the exchanges, investors have the option of 3 to 4 Gold ETFs which are having good volume in the stock exchanges. With e-Gold, liquidity is not at all a problem. Volume of e-gold is picking up fast. Tracking error is almost nil with E-gold. Whereas in gold ETFs tracking error and expense ratio and impact cost come into play. Lastly, e-Gold is better investment in Gold than gold ETF in respect of less expenses, no tracking error, less impact costs, more liquidity, extended trading hours. But these differences combined make to return percentage gap of 2 to 3% between e-gold and gold ETF. Above said are the reasons behind the increased return percentage for e-Gold when compared with Gold ETFs in India

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