Commodity ETF

A Commodity ETF is an exchange-traded fund that provides investors with exposure to commodity prices — such as gold, silver, crude oil, or a basket of commodities — without requiring direct investment in physical commodities or commodity futures contracts. In India, the most widely available and actively traded commodity ETFs are Gold ETFs — which hold physical 24-carat gold (99.5% or higher purity) in dematerialised form as the underlying asset — listed on NSE and BSE. Silver ETFs were introduced in India in 2022, allowing investors to gain exposure to silver prices through a regulated, dematerialised product. Gold ETFs are priced to reflect domestic gold prices (spot gold price plus applicable import duties), enabling investors to buy and sell gold at real-time market prices through their stock broker with complete transparency and no storage or making charges. For retail investors, commodity ETFs offer multiple advantages over physical commodity ownership: no storage risk, no counterparty risk, complete pricing transparency, easy transferability through Demat, and fractional investment (Gold ETFs can be bought in fractions as small as 1 gram). The expense ratio of Indian Gold ETFs ranges from 0.3% to 0.65% per annum — significantly lower than the costs associated with holding physical gold including storage, insurance, and potential impurity risks when buying or selling physical jewellery or coins.