There are two ways in which one can trade in commodities – One is trading in physical
quantities directly, and second is trading through commodity derivatives.
Commodity markets are markets where raw or primary products are exchanged. These
raw commodities are traded on regulated commodities exchanges, in which they are
bought and sold in standardized contracts. Most commodity markets across the world
trade in agricultural products and other raw materials through contracts based on
them. These contracts can include spot prices, forwards, futures and options on
futures. Other sophisticated products may include interest rates, environmental
instruments, swaps, or ocean freight contracts.
Gold historically has long been a commodity of safe haven, to which people have
flocked to in times of uncertainity, apart from the obvious precious metal appeal
it carries. It is also a hedge against inflation..
Gold ETF is a security listed on the stock exchange available for trading with an
intention to offer investors a means of participating in the gold bullion market
without the necessity of taking physical delivery of gold. Buying Gold ETF is purchasing
gold in electronic form. You buy them just like you buy stock of any company from
WHY GOLD ETFs ?
- Cheapest form of pure physical gold with no premium or making charges.
- No issues of wastage or impurities like in the case of physical gold.
- Better liquidity
- Can be purchased or sold anytime at transparent real time price
- Better than mutual funds – can be bought and sold anytime during the day
- Safety and security- no worries of theft and also save on locker charges
- Helps in Portfolio Diversification
- Benefit on long-term capital gains
- Easy to buy in small lots, 1 unit at a time. (1 unit = 1gm of gold price in spot)