What is Gold ETF and Gold ETF Fund of Fund?

What is Gold ETF and Gold ETF Fund of Fund (FoF)?

Gold ETF is a MF Scheme which invests in physical gold bars with purity of 99.5% fineness or above. A Gold ETF Fund of Fund (FoF) invests in Gold ETF units.

Investing in gold through the MF route gives investors the twin benefit of an investment physically backed by gold with the simplicity of transacting digitally.

Why should one consider investing in Gold?

Portfolio Diversification

Gold is considered to balance portfolios against the volatility of other asset classes.

Buffer against Currency Depreciation

Being a globally priced metal, it acts as a hedge against currency depreciation.

Buffer against Geopolitical Shocks

Investors generally turn towards gold when adverse geopolitical events occur.

Improved Taxation

Post Union Budget of July 2024, taxation of ETFs and FoFs has been improved.

Why invest in Gold through the ETF / FoF route?

Convenience and Safety: No hassle of storing physical gold.
Purity: ETF holds atleast 99.5% fineness gold (as prescribed by SEBI ). FoF investors also benefit from purity.
Liquidity:
- ETF: Market Makers provide liquidity on Stock Exchanges.
- FoF: Daily investment & redemption possible.
Small Ticket Investing:
- ETF: SIPs available with most brokers.
- FoF: SIP, STP, SWP facilities available.

What are the main differences between Gold ETF & Gold FoF?

Feature	Gold ETF	Gold ETF FoF
Need for Demat A/c	Yes	No
Taxation*	12 month holding period to qualify for LTCG. For fresh purchases made today, a 12.5% LTCG rate (> 12 months holding period for ETFs) would be applicable if redeemed after Mar 31, 2025. Otherwise, STCG tax as per investor’s slab.	24 month holding period to qualify for LTCG. For fresh purchases made today, a 12.5% LTCG rate (> 24 months holding period for ETF FoFs). Otherwise, STCG tax as per investor’s slab.

*Source: India Budget. As of Aug 31, 2025. Surcharge and Health & Education Cess as applicable. In view of the individual nature of the tax consequences, each investor is advised to consult his/ her own professional tax advisor. ~ SIP = Systematic Investment Plan, STP = Systematic Transfer Plan, SWP = Systematic Withdrawal Plan

Who are the Gold ETF / FoF suitablefor?

A buffer for their portfolio against market volatility, geopolitical shocks and currency depreciation

Twin benefits of investment physically backed by high-purity gold with the convenience of transacting digitally

The ability to invest in gold in a regular and disciplined manner via SIP~

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