SBI launches Gold ETF


India’s largest public sector bank–State of Bank of India (SBI)–on launched a gold exchanged traded fund (Gold ETF) with an ambitious plan to collect at least 1.5 billion rupees to 2.0 billion rupees of investments to begin with.

The Gold ETF from the Mutual Fund division of SBI is the sixth exchange traded fund in the yellow metal to hit the Indian markets. Banks and financial institutions are getting ready to launch new Gold ETFs and gold schemes as India is the largest consumer market for gold in theh world.

SBI officials said that the Gold ETF will be open up for subscription till April 28. The fund will be then listed on india’s National Stock Exchange.

R S Srinivas Jain, senior vice president and chief marketing officer of SBI Mutual said that the bank is bullish on the growth of Gold ETFs in India. “We feel that India has a great potential for more Gold ETFs. We are planning to raise good money through the exhange traded fund in gold,” he said.

He said the fund house – a joint venture between State Bank of India and France’s Societe Generale Asset Management – plans to market the scheme through the state-owned bank’s branches.

The SBI Gold ETF will be benchmarked against the London AM fix price – spot price set in the morning – and the gold will be imported by Bank of Nova Scotia on behalf of SBI Mutual.

Returns on India’s five gold ETFs increased by 6 per cent during the month as the yellow metal touched a new high.

Launched in 2007, Gold ETFs in India are managed by five fund houses including Benchmark Asset Management, UTI Mutual Fund, Kotak Mahindra Mutual Fund, Reliance Capital Asset Management and Quantum Mutual Fund.

Though Gold collections under the ETFs are growing in India year on year, they remain negligible when compared to India’s imports of around 700 tonnes annually.

Usually Gold ETFs track International Gold Price.

Analysts say those who made money from gold ETFs in the past few months also should thank Indian rupee. Because, rupee’s steady depreciation helped investors gain handsomely from gold ETFs. Over the past year, international gold prices have headed nowhere and are actually down by about 3 per cent. But the gains came from the rupee fall.

In India gold prices rose roughly 40 per cent the past year. Going forward, therefore, returns for Gold ETF investors will depend not only how global gold prices fare, but also on the direction of the rupee against the dollar.

Gold ETFs — instruments that can be traded like shares and are backed by physical gold holdings.  However, you may require a Trading and DEMAT Account with a NSE member or a bank to deal with Gold ETF.  One of the main advantages of Gold ETF is you need not carry gold physically, yet attain the benefits of price appreciation.  The other advantage is you stand to save money that is to be shed under the heads of wastage and making charges if you prefer to invest in physical gold.

Want to know more about Gold ETF ?  Check these previous articles :

1. What are Gold Exchange Traded Funds?

2. 5 Benefits that you reap while investing in Gold ETF

Also Check this GConnect Gold ETF Calculator

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