Gold vs Gold ETFs: Evidences from India

: Among all the investment alternatives available in the world, gold has shown better performance over years. In spite of its mediocre short term performance, Gold has constantly outperformed other conventional asset classes such as currencies, de bt, equity and other commodities regardless of most of economic and market cycles with a CAGR of 17.1% in INR term and 14.5% in USD term for the past ten year period. However, there are a number of ways by which investment in gold can be made like gold ETFs and fund of funds, E-gold, stocks of gold mining companies, gold futures, gold bars, coins and biscuits, gold jewellery, etc. Out of these, ETFs are amongst the most popular investment tools. This paper attempts to compare the performance of gold ETFs and physical gold. For this purpose, risk and return of physical gold has been compared with the risk and return of gold ETFs. Monthly closing prices from March 31, 2011 to March 31, 2014 have been taken. The empirical evidence concluded that the gold ETFs have lesser variability as compared to the physical gold and hence the performance of gold ETFs is better than the performance of physical gold.