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What are Gold Etf's? Research Team | Posted On Monday, February 09,2009, 04:33 AM

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What are Gold Etf's?



Commonly referred to as paper gold, they are basically open ended mutual fund schemes, which invest the money collected from investors, in Standard gold bullion of 99.5% purity. The investor's unit holdings are listed on a stock exchange. These do not require any active management and are passively managed and provide returns, in lieu of the physical gold in the spot market. A minimum of 1 unit can be purchased by the investor.

1. What are Gold BeES?

Gold BeES stand for Gold Benchmark Exchange Traded Scheme. Gold BeES are intended to offer investors a means of participating in the gold bullion market without the necessity of taking physical delivery of gold, and to buy and sell that participation through the trading of a security on National stock exchange. Gold BeES is designed to provide returns that, before expenses, closely correspond to the returns provided by physical Gold. Each unit is approximately equal to the price of 1 gram of Gold.

2. Why should I invest in Gold?

  • An Excellent Diversification for your Portfolio
  • Global Asset Class
  • Hedge against Inflation
  • Low Volatility as compared to Equities
  • Store of value

3. What are the Advantages of Investing in Gold through Gold BeES?

  • Potentially cheaper to have price exposure to gold price as compared to other available avenues
  • Quick and Convenient Dealing through Demat Account
  • No Storage & Security Issues for investors
  • Transparent Pricing
  • Taxation of Mutual Fund
  • Listed and traded on NSE just like a stock-Easy Buying/Selling
  • Ideal for Retail Investor as minimum lot size to trade is one unit on secondary market.
  • NAV of a Unit will track price of approximately 1 Gram of Gold

The above points can be better represented through the table below

Comparison of Investment in Gold through Jeweller, Bank and GoldBeES:




Bank (Bars/Coins)

Gold BeES


Purchase and sale

Physical Form

Physical Form

Dematerialized Form



May differ from jeweller to jeweller

May differ from bank to bank

Linked to
gold prices


Buying Premium
above gold price

Likely to be More

Likely to be More

Likely to be Less


Making Charges

Are involved

Are involved

Not involved


Impurity Risk

May exist

May exist

Cannot exist


Storage Requirement



Demat Account


Security of Asset

Investor Responsible

Investor Responsible

Taken care of
by Fund House



At Deep Discount

May not be possible

At transparent
Market Prices


Convenience in buying , storage and selling

Less-As physical movement & transfer involved

Less-As physical movement & transfer involved

More- Totally Demat


Wealth Tax





Long term Capital gain tax

Only after 3 years

Only after 3 years

After 1 year

4. How do I Invest in Gold BeES?

During NFO:

The minimum amount of investment during NFO for Cash is Rs.10, 000 and in multiples of Rs.1,000 Thereafter Each unit of Gold BeES being offered will have a face value of Rs.100/- each and will be issued at a premium equivalent to difference between allotment price and the face value of Rs.100/-

Ongoing Basis:

Once listed on the NSE, 1 unit of Gold BeES will represent approximately 1 Gram of gold and investors can buy or sell units on the secondary market (National Stock Exchange of India Ltd.) The minimum number of units that can be bought or sold is 1 (one) unit.

5. What type of Account do I need to trade Gold BeES?

  • A trading account with an NSE Broker
  • A Demat Account as Gold BeES can be settled only in Demat form

6. How are Transactions settled?

Only in Demat account with T+2 rolling settlement.

7. What is the Load Structure in Gold BeEs?

A. New Fund Offer Entry Load Slabs will be as below :

Entry Load Slabs will be as below :


Entry Load

Rs. 10,000 to Rs. 49,99,000


Rs. 50,00,000 to Rs. 1,99,99,000


Rs 2,00,00,000 to Rs 4,99,99,000


Rs. 5,00,00,000 and above


There will be no exit load charge by the Fund

B. Ongoing Basis:
There will be no entry / exit load charge by the Fund

8. What is the expense ratio of Gold BeEs?

The total expense ratio will be maximum of1% per annum.

9. What is Taxation on Gold BeES?

Since Gold BeES is classified under Mutual Fund, Investor investing in this need not pay Wealth Tax.

The scheme will have Non equity Mutual Fund Taxation, applicable as per current Tax laws, which investor has to pay after redemption.

10. What is the Investment Objective of Gold BeES?

The investment objective of Gold Benchmark Exchange Traded Scheme (Gold BeES) is to provide returns that, before expenses, closely correspond to the returns provided by domestic price of gold through physical gold.

11. Where the Market price/NAV for Gold BeES will be linked?

Market Price will be linked to the London Bullion Market Association AM fixing price on that particular day in US$/troy.

12. What is Benchmark Asset Management Company Pvt.Ltd?

Benchmark Asset Management Company a SEBI approved Asset Management Company & is :

  • The largest ETF (Exchange Traded Fund)manager in India

  • Largest Index Fund Manager in India Total Assets under management of more than Rs.7938.48 crores * (*as on 29th December 2006.)
  • India’s first Asset Management Company to focus on indexing and quantitative asset management.
  • Endeavor to bring newer products in India
  • Run and Co promoted by professionals with long experience in Indian and International Financial Market.

Benchmark Introduced:

  • Idea of Gold ETF in the world
  • First ETF in India and emerging Asia
  • First Liquid ETF in the World
  • First arbitrage fund in India
  • First Split Capital Fund in India
  • First Quantitative Model based PMS products in India

13. What are Risk factors?

  • Mutual funds and Securities investments are subject to market risks and there can be no assurance or guarantee that the objective of the Scheme will be achieved.
  • As with any investment in securities, the Net Asset Value (NAV) of the units issued under the Scheme can go up or down depending on the factors and forces affecting the Bullion Market, Capital Market and Money Market.
  • Past performance of the Sponsors /Investment Manager / Mutual Fund and its affiliates does not indicate the future performance of the Scheme of the Mutual Fund and may not necessarily provide a basis of comparison with other investments.
  • Gold BeES is the name of the Scheme and does not in any manner indicate either the quality of the Scheme or its future prospects and the returns. Investors are therefore urged to study the terms of offer carefully and consult their Investment Advisor before they invest in the Scheme.
  • Though ETFs are popular abroad, it is still a new concept in India.
  • The Sponsor is not responsible or liable for any loss or shortfall resulting from the operation of the Fund beyond the initial contribution made by it of an amount of Rs. 1 Lac towards setting up of the Mutual Fund.
  • Investors in the Scheme are not being offered any guaranteed or assured returns.
  • The Scheme NAV will react to the Bullion market movements. The Investor could lose money over short periods due to fluctuation in the Schemes’ NAV in response to factors such as economic and political developments, changes in interest rates and perceived trends in Bullion market movements, and over longer periods during market downturns.

14. Is Bank of India venturing into gold/bullion market?

Yes, Bank of India has RBI approval to retail gold/bullion to its customers.

15. What form is Gold being sold in?

Pure Gold Coins will be sold in the form of round, oval and rectangular bars.

16. In what weight are the gold bars available?

Currently Pure Gold Coins will be available in 4 g, 5 g, 8 g, 10 g, 20 g and 50 g weight.

17. How will Bank sell the gold?

Bank will sell the gold coins through its CBS branches.

18. What is the purity factor of gold?

Pure Gold Coins will be of 24 Karat, 999.9% purity gold.

19. What is the authenticity proof?

The gold Coins are packed in tamper - proof certicard packs that are see through at the manufacturing stage itself to prevent any damage / theft during transit. Moreover, the gold Coins sold by the Bank come with an "Assay Certification" indicating the highest quality of gold at 999.9% purity as per international standards.

20. Who can buy the gold?

Both, Bank of India Customers and non-customers are eligible to buy gold coins. However, Bank of India customers can issue a cheque from their any operative SB/CD/OD/ account or provide a debit mandate towards purchase of gold coins.

21. What is the price that the gold will be sold at?

The price will depend upon the market rate of gold.

22. Will Bank of India buy back the gold sold by them?

Bank of India does not buy gold coins sold by them. You can sell it to any jeweller.

23. How can I buy gold through a Branch?

You can buy gold through any Bank of India branch (Core Banking Branch) by following these simple steps :

  • Visit the Bank’s Branch & fill the Application Form.

  • Mention the weight & quantity of the gold coins required in numbers & words & the mode of payment.
  • Submit the gold Coins application form along with the cash / debit instructions / cheque form your savings / current account/OD Account at the counter.
  • Branch will accept & process your requirement and deliver the gold coins along with the Invoice to you.

24. What documents are required for the purchase of Gold coins/bars?

No documents are required for the purchase of Gold coins/bars with value less than Rs. 20,000. For purchase of Gold coins/bars from Rs. 20,000 to Rs. 50,000, an Identity proof required. If the transaction value is above Rs. 50,000 PAN card copy and an Identity proof of the customer would be required.


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