4 Differences Between E-gold And Gold Etf You Must Know About

From time immemorial, gold has been sought after by people as a cushion or hedge against inflation

, changing rates of interest, stock market volatility, wars, natural calamities and changing real estate prices. For investors, buying gold is a part of appropriate asset allocation strategy. In the last five years, gold has offered investors 122.09 percent returns. At any given time, you can be sure that gold prices will rise moderately in short and long term. During difficult times, gold provides that perfect hedge and is an excellent diversification strategy.

1.There are many types of gold investment avenues to choose from. If you are planning on investing in E-Gold or Gold ETF, it is time to understand 4 major differences between the two. You will then be able to find out which will be a value addition to your portfolio by doing a cost to benefit comparison.

If you are already trading shares in a demat account, you can use the same account to purchase Gold ETFs. If not, you must open an account and commence trading after posting margins. You cannot however trade E-Gold on the same demat account you use for share trading. A separate account must be opened with a DP or Depository Participant endorsed by NSEL. NSEL website will give you a list of DPs available.

This is not enough. After opening a DP account, you must also open a Demat client account or trading account with one of the NSEL members. The website will also give you a list of members to choose from. You can thus see that initial E-Gold investing cost is more than Gold ETF cost.

2.Another area where Gold ETF and E-Gold investments differ is the time of trading. Both E-Gold and Gold ETFs are backed by gold kept with the custodian for the value invested. You can trade E-Gold between 10 AM and 11.30 PM on weekdays through the exchange. Gold ETFs however can be traded only during market timings.

3.It is not possible to convert Gold ETFs into physical form. You can only purchase and sell them in dematerialized form. E-Gold is physically delivered as coins or bars in specific locations. Purity of both Gold ETFs and E-Gold is guaranteed by the London Bullion Market Association.

4.The year 2010 saw E-Gold outperforming all other gold investment avenues. Realizing that a lot of risk is involved with physical gold, investors are increasingly investing in E-Gold.

Keep the above aspects in mind as you choose between investing in Gold ETFs and E-Gold make an informed choice based on your specific requirements.

by: Adrian Getty

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