eGold vs Gold ETF vs Gold Coins

Gold has given very good returns over the last few years. There are various options available for investors wanting to invest in Gold. This post offers a comparison between various investment options available in Gold.

Parameters	E-Gold	Gold ETF	Bars / Coins
Form of Holding	Demat	Demat	Physical
Market Timings	10:30 am to 11:30 pm	9:15 am to 3:30 pm	As per Bank or Jeweller timings
Physical Delivery	Possible for any number of units	Possible only above 1 Kg	Not Applicable
Physical Delivery Centers	Multiple	Single	Single
Convert to Jewellery	Option available with select reputed Jewellers	Not Available	Option available if purchased through Jeweller
Pricing	Linked to Indian Gold Prices	Linked to International Gold Pricing	May differ as Banks and Jewllers charge premium anyways
Impurity Risk	Cannot exist	Cannot exist	May exist
Security	Responsibility of exchange	Responsibility of custodians of mutual fund	Responsibility of investor
Resale	Transparent - At secondary market prices	Transparent - At secondary market prices	Banks do not buyback, Jewellers buyback at a discount
Convenience of buying,   storage and selling	High	High	Low
Recurring expenses (Storage, Insurance and Maintenance)	0.40%	1%	High Locker Rent and Insurance
Returns	Highest as it is the most cost effective	Slightly lower than Gold ETF	Lowest in this category
Liquidity	Rs 200-250 crore turnover	Rs 10-15 crore turnover	Figures not available
Taxation	Need to hold for 3 years to be considered a long term capital gain which is 20% in eGold. Wealth tax is also applicable.	Need to hold for 1 year to be considered a long term capital gain which is 10% in Gold ETF. No wealth tax applicable.	Wealth tax applicable
Administration	Need a separate Demat Account other than shares	Same Demat account as shares	Not Applicable

While e-gold directly tracks the domestic, physical gold prices, gold ETF only mirrors them. Certain gold ETFs have the flexibility to invest up to 10% of the total net assets in money market instruments and this can lead to tracking error. Some ETF companies also invest in gold futures and in a basket of gold mining companies. The earnings of a gold mining company may not reflect the price movement in gold, thereby reducing the impact of the price rise. As a result, the returns from ETFs may not be similar to those from investing in physical gold.

While eGold offers highest returns in comparison to Gold ETF and physical gold, Gold ETF has a better taxation as one needs to hold Gold ETF for only 1 year to be considered a long term capital gain and taxation is 10% - half of what is there for eGold. Also, one does not need to pay wealth tax.

However, eGold offers option to take physical delivery at multiple centres and option to convert it into jewellery with select and reputed jewellers. 

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