GOLD EXCHANGE TRADED FUNDS

Presented by:
Foram Thakkar
Khushbu Sheth
Palak Thakkar
Soumya Kumar Mondal
EXCHANGE TRADED FUND
●
Basket of securities traded like stocks
●
Open-Ended funds
Basic ●
Investments done in sectors specified by offer
documents

●
Started in 1993 in USA
History ●
60% of total American Stock Exchange
from ETFs

●
Bought/sold at price usually close to actual intra-day NAV
Directly bought/sold from the exchange
Working
●

●
As funds are listed in the exchange: lower cost of distribution
& processing, more transparency and wider rich
HISTORY OF GOLD ETF IN INDIA
May 2002: Benchmark AMC Filed Offer Document for the
first ETF in the world with SEBI

Nov 2006: SEBI amended Custodian of Securities Act

Feb 2007: Gold ETF ‘GOLD BeES’ introduced in India by

Benchmark AMC
Mar 2007: Benchmark Gold ETF Gold BeES listed on NSE.
UTI launched its gold fund UTI GOLD SHARE.

Apr 2007: UTI GOLD SHARE get listed on NSE

July 2007: Kotak gold etf

Jan 2008: Quantum gold etfs

Oct 2008: Reliance gold etf

March 2009: SBI gold etf

Jan 2010: Religare gold etf

 UNDERSTANDING GOLD ETF
●
Open ended mutual fund scheme
Definition ●
Invest money collected from investors in standard
gold bullion(0.995 purity).

●
Track and reflect the price of the gold.
Purpose ●
An opportunity to gain exposure to the performance
of gold

●
Hedge against the inflation & downward dollar movement and Hedge against stock market

Strategies Short term protection

●

●
Amount of exposure and management expense ratio
●
Investors can purchase 1 unit also

Investors Requirement ●
Demat account
IMPACT
GOLD ETF V/S BSE SENSEX
STRUCTURE
ADVANTAGES AND DISADVANTAGES
 DIFFERENCE BETWEEN GOLD ETFS
AND PHYSICAL GOLD
Parameter Gold ETFs Physical Gold
Holding Dematerialized Form Coin, bar etc.
Transparency Very High Very Low
Pricing Will be traded at Not Transparent
NSE/BSE, so,
transparent

Sale Can be done on the Based on set of

exchange itself conditions

Wealth Tax No Yes

Short Term Capital If sold before 1 year If sold before 3 years
Gain Tax

Impurity Risk Nil High

9
COMPARISON
 ENTRY LOAD
(Purchases attracting
entry load of
4.00%)
Unitholders Investment (Rs.) 100
Purchase Price at which Units are 10.4000
allotted (Rs.)
No of Units allotted 9.6154
Amount available to Scheme for 9.6154*10 = 96.1538
investment (Rs.)

Load Amount utilized for payment 9.6154*10*4.00% =

of Broker/Agents 3.8462
commission (Rs.)
Initial Issue expense charged to 3.8462
investor
Initial issue expense to be borne by Any amount incurred
the AMC above Rs.
3.8462
 EXPENSES

Initial Issue Expenses Estimated %age of

Amount
Collected
Marketing and Advertising 0.40
Printing and Mailing 0.50
Broker/Agent’s Commission 3.00
Registrar Expenses 0.05
Bank charges and Other Expenses 0.05
Total 4.00
 EXIT LOAD

Calculation of Redeemed Units If Exit Load of 1.00% is

explained: chargeable

Unit Balance before Redemption A 2305.235

NAV on date of redemption B Rs. 11.0000

Exit Load Chargeable @ 1.00 % C Rs. 0.110 (11 x 1.00%)

Redemption Price D=B–C Rs. 10.9890 (11 – 0.110)

If Redemption request is in Rs E Rs. 3500

No. of Units redeemed F = E /D 318.500 (3500/10.9890)

No of Units left G=A–F 1986.735 (2305.235 – 318.500)

If Redemption request is in Units I 350 Units

Redemption amount will be J=I*D Rs. 3846.150 (350 x 10.9890)

No of Units left K=A–I 1955.235 (2305.235 – 350)

COMPARISON OF RETURNS

 Return from physical gold

Price of gold
 On 16th April,2009=Rs
1432.1
 On 16th April,2010=Rs
1680
 absolute return
=17.31%
 WHY NOT GOLD ETF?
 2006-07  Lack of awareness
 Prefer ion physical form
 Need of Demat account
 Lack of enthusiasms of
distributors
 Brokers are not interested
in chasing clients
 CONCLUSION

Worldwide there are approximately 2132 ETFs and exchange

traded products (ETPs) available, with more than $700
billion in total assets under management

 Study of ETFs reveals that they are one of the best option
available for the investor to invest in a particular sector
and get high return from that sector when that sector is in
boom stage ,since the ETFs do not have any lock in period
it is beneficial for the investor ,he can very easily buy/sell
the ETFs in secondary market and book huge profit or loss