What is a Gold ETF? Benefits, Risks & How to Invest
Written by Mariyam Sara
3 min read | Updated on October 13, 2025, 18:32 IST
What is a Gold ETF?
How do Gold ETFs work?
Types of Gold ETFs
Benefits of Investing in Gold ETFs
Risks of investing in Gold ETF
How to Invest in Gold ETFs.
Upstox is a leading Indian financial services company that offers online trading and investment services in stocks, commodities, currencies, mutual funds, and more. Founded in 2009 and headquartered in Mumbai, Upstox is backed by prominent investors including Ratan Tata, Tiger Global, and Kalaari Capital. It operates under RKSV Securities and is registered with SEBI, NSE, BSE, and other regulatory bodies, ensuring secure and compliant trading experiences.
When Indians think about investments, two assets come to mind: Real estate and gold. Gold is considered the safest investment due to its high resale value. When you buy physical gold like jewellery, you will not only pay the gold value but also the making charges, along with other taxes, which at the time of sale, will not be compensated. But there is a way you can invest in gold without paying any extra charges that eat away at your profit.
In this blog, you will understand what Gold ETFs are, the risk & reward they carry and how you can invest in Gold ETFs.
What is a Gold ETF?
Gold ETFs are Exchange Traded Funds that mirror the domestic price of gold in a country. With Gold ETFs, you can buy physical gold of the highest purity in a dematerialized or paper form. These gold ETFs are freely traded on the stock exchange and are a passive investment for novice investors.
How do Gold ETFs work?
Gold ETFs are mutual fund instruments that are traded on the stock exchange throughout the day. Different gold ETFs invest in either gold bullion, I.e, physical gold, or futures contracts.
When you invest in gold ETFs, the value of your ETFs mirrors the current market price of gold. For example, if the value of gold rises by 1%, your Gold ETFs value will increase by a similar percentage.
Types of Gold ETFs
Here are the different types of Gold ETFs you can invest in,
Physical Gold ETFs
When you invest in Physical Gold ETFs, you buy a fractional ownership of the gold kept in reserves. Physical Gold ETFs help you invest in gold without having to worry about security and storage requirements.
Gold Mining ETFs
Gold mining ETFs invest in companies involved in gold mining, refining and production. The value of your Gold Mining ETF is tied to the performance of these companies.
Leverage Gold ETFs
Leverage Gold ETFs are investment funds that use debt and futures contracts to amplify their daily returns on gold. For example, a 2x Leveraged ETF aims to provide a 2x return on gold’s daily performance. This ETF carries high reward and high risk, as if the gold prices drop, the value of your ETF will drop significantly.
Inverse Gold ETFs
Inverse gold ETFs move against the gold prices. Investors use Inverse Gold ETFs to hedge against declining gold prices and profit when gold prices fall.
You can pick any type of Gold ETF based on your investment strategies. You need to have a demat account with a SEBI-authorized brokerage firm to start investing in a Gold ETF.
Benefits of Investing in Gold ETFs
Here are the benefits of investing in Gold ETFs,
Lower Risk
Gold prices are typically stable and are steadily rising. The risk of a significant drop in gold prices is lower because most countries start accumulating gold during economic uncertainty.
Easily Tradeable
Similar to equity-based funds, Gold ETFs can be easily traded on the stock market throughout the day within trading hours. Gold ETFs are highly liquid and can be bought directly from the stock market.
No entry and exit loads
When you buy or sell your Gold ETFs, no entry or exit load is charged. This ensures you carry home the full value of your Gold ETFs.
Tax benefits
When you invest in Gold ETFs, you are not charged any GST or STT (Securities Transaction Tax). Only capital gain tax is levied if you sell your gold ETFs at a profit.
Risks of investing in Gold ETF
Just like any other investment, gold ETFs are subject to market conditions, where if the market value of gold falls, your investments will suffer. SEBI regulates Gold ETFs, protecting investors’ interests and regularly auditing the physical gold purchase by Fund houses through a statutory auditor.
How to Invest in Gold ETFs.
To invest in Gold ETFs, you need to have a demat account with a SEBI-authorized brokerage firm like Upstox.
Follow the steps below to open your demat account.
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Choose a depository participant to open your demat account with. It could be a bank or a trusted brokerage firm like Upstox, authorised by SEBI.
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Fill out a demat account opening form and submit it. You can check out Upstox’s Demat account and open your Demat account.
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Fill the demat account opening form and attach the scanned copies of your documents. Below is the list of documents required.
- ID Proof
- Resident Proof
- PAN
- Passport-size photos
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After filling the form, you’re expected to sign an agreement with your broker, clearly stating your respective responsibilities as trader/investor and broker.
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Once all documentation and formalities are done, you will receive your demat account number. Once all formalities are done, you can start investing in Gold ETFs right away.
Gold ETFs are a flexible and liquid tool that allows you to earn returns on the seemingly ever-rising gold prices without the hassle of dealing with jewelers and their markups.
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About Author
Mariyam Sara
Sub-Editor
holds an MBA in Finance and is a true Finance Fanatic. She writes extensively on all things finance whether it’s stock trading, personal finance, or insurance, chances are she’s covered it. When she’s not writing, she’s busy pursuing NISM certifications, experimenting with new baking recipes.
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