Why Gold in Bank Lockers Not Safe But Gold ETFs Are Safest

Gold is the apple of eyes for people of India. There won’t be any home that doesn’t want gold jewelry. I don’t like investing in gold or buying jewelry as gold is bad for India’s economy. Majority of people prefers to invest in gold and this investment is mostly in physical gold  in the form of jewelry. Keeping gold in the home is not so safe as incidents of robbery are not very uncommon. Many people keep jewelry into bank lockers which give them extra security as the lockers are securely managed by banks. But is the gold in lockers fully secure?

Recently in Andhra Pradesh Bank of Baroda 6000 lockers were robbed. The lockers were having a big amount of jewels. Lockers are fully private and what you are keeping in the locker is not kept in the records. What is the value of the things you are keeping in the locker is also not verified. Bank doesn’t know what you are keeping in the locker. Bank of Baroda customers were claiming that they stored jewelry there but bank not accepting. Banks gives only limited compensation in  the event of loss of any valuables in the locker. It doesn’t matter what the value of contents stored in the locker is  only limited and fixed for all compensation is provided.

So I don’t think keeping jewelry in the banks lockers in the fool proof secure way. Is there any better way? Yes Gold ETF is more secure

What is Gold ETF ?

ETF stands for exchange traded funds it replicates the value of underlying assets. In case of Gold ETF the underlying asset is Gold. ETFs are listed on the exchanges and its unit can be bought and sold easily. Units are stored in electronic form in the Demat account. You can buy and sell them easily any time.

One unit of Gold ETF represents one gram of physical gold of 99.5% purity.  Below are some of the great advantages of Gold ETF over physical gold.

Advantages of Gold ETF over physical gold 

1. No impurity Risk 

When you buy physical gold from the market there is a risk of impurity. Its not easy for common man to detect the level of purity in the gold which he is buying. One that comes with purity certification is costly. But with gold ETF this risk is not there, every unit of gold ETF represent 99.5% pure one gram gold.

2. No Liquidity Risk

Liquidity means the ability to buy and sell any time. Physical gold is not so liquid especially in the form of jewelry. You can’t immediately sell it in the market at the current market price. Different jewelers will quote you a different price. Your jeweler may not buy it at the market price. But gold ETFs are liquid you can sell it anytime at the market price.

3. Less Transaction cost 

Transaction cost is high in case of physical gold. While with ETF you just have to pay brokerage cost which is around 0.15-0.3%  varies broker to broker.

4. No Wealth tax 

On physical gold, wealth tax is applicable whereas it is not applicable on Gold ETFs

5. No risk of theft 

Physical gold can be stolen, but ETF Gold units can’t be stolen as they are stored in electronic form.

gold etf advantage over physical gold

How to buy Gold ETF ?

You just need a Demat account  to buy Gold ETFs you can open a demat account with any broker of your choice. You can place the order to buy ETFs yourself through trading apps or software provided by the broker or you can place the order on the phone as well. There are many Gold ETF traded on exchanges following are some of them.

GoldBees
AxisGold
Goldshare
HDFCCMFGETF
IPGETF
KotakGold
RelGold
BSLGold

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