Beginner guide · 6-minute read
Gold ETFs and gold funds, explained simply
A gold ETF lets you own gold without keeping it at home: each unit stands for gold held in a vault, and you buy and sell units on the stock exchange. A gold fund is a mutual fund that invests in gold ETFs, so you can buy it without a demat account and even start a SIP.
Checked on 15 Oct 2026 against RBI's gold price data (Handbook of Statistics, Jul 2026), SEBI's digital gold caution (Nov 2025) and the 2026 SGB tax change.
In one minute
- Who runs it
- Mutual fund companies, regulated by SEBI. The gold is held by a custodian.
- What it earns
- Nothing fixed: it follows the gold price. RBI's prices show 7.6% to 12.4% a year over 10-year stretches (middle 9.7%), before costs.
- Costs
- Gold ETFs about 0.6% a year, plus brokerage. Gold funds about 0.75% a year in a direct plan.
- Tax
- 12.5% on gains after 1 year for an ETF, or 2 years for a fund; your slab rate before that.
How it works, with real numbers
Say you put ₹1,00,000 into a gold ETF for 10 years, and gold grows 9.7% a year, the middle of its 10-year record. After the 0.6% fee you'd have about ₹2,37,646, and ₹2,19,752 after 12.5% tax on the gain.
If gold grew 7.6% a year instead, you'd keep about ₹1,83,414; at 12.4%, about ₹2,76,661. A gold fund with a 0.75% fee would leave about ₹2,16,653 at 9.7%.
How the gold price has moved
Gold averaged ₹1,18,421 per 10 grams in 2025-26, about 17 times its 2005-06 average. Over every 10-year stretch of the last 20 years it grew between 5.7% and 16.1% a year.
- Gold pays no interest, so you gain only when its price rises, and it has had long flat spells: after 2012-13, the yearly average didn't beat that level again until 2018-19.
- The range used here, 7.6% to 12.4% a year (middle 9.7%), is the middle half of those 10-year outcomes, before costs and tax.
- These are yearly averages, so short spikes and dips are smoothed out. RBI notes that prices up to 1999-2000 and from 2000-01 come from different sources, so they may not be strictly comparable.
See how the range is worked out
| 10 years | Grew a year |
|---|---|
| 2005-06 to 2015-16 | 14.4% |
| 2006-07 to 2016-17 | 12.4% |
| 2007-08 to 2017-18 | 11.4% |
| 2008-09 to 2018-19 | 9.2% |
| 2009-10 to 2019-20 | 8.9% |
| 2010-11 to 2020-21 | 9.7% |
| 2011-12 to 2021-22 | 6.4% |
| 2012-13 to 2022-23 | 5.7% |
| 2013-14 to 2023-24 | 7.6% |
| 2014-15 to 2024-25 | 10.7% |
| 2015-16 to 2025-26 | 16.1% |
See every year's price (41)
| Year | Average price, 10 grams |
|---|---|
| 2025-26 | ₹1,18,421 |
| 2024-25 | ₹75,842 |
| 2023-24 | ₹60,624 |
| 2022-23 | ₹52,731 |
| 2021-22 | ₹47,999 |
| 2020-21 | ₹48,723 |
| 2019-20 | ₹37,018 |
| 2018-19 | ₹31,193 |
| 2017-18 | ₹29,300 |
| 2016-17 | ₹29,665 |
| 2015-16 | ₹26,534 |
| 2014-15 | ₹27,415 |
| 2013-14 | ₹29,190 |
| 2012-13 | ₹30,164 |
| 2011-12 | ₹25,722 |
| 2010-11 | ₹19,227 |
| 2009-10 | ₹15,756 |
| 2008-09 | ₹12,890 |
| 2007-08 | ₹9,996 |
| 2006-07 | ₹9,240 |
| 2005-06 | ₹6,901 |
| 2004-05 | ₹6,145 |
| 2003-04 | ₹5,719 |
| 2002-03 | ₹5,332 |
| 2001-02 | ₹4,579 |
| 2000-01 | ₹4,474 |
| 1999-00 | ₹4,394 |
| 1998-99 | ₹4,268 |
| 1997-98 | ₹4,347 |
| 1996-97 | ₹5,071 |
| 1995-96 | ₹4,958 |
| 1994-95 | ₹4,667 |
| 1993-94 | ₹4,532 |
| 1992-93 | ₹4,104 |
| 1991-92 | ₹4,298 |
| 1990-91 | ₹3,452 |
| 1989-90 | ₹3,229 |
| 1988-89 | ₹3,175 |
| 1987-88 | ₹3,082 |
| 1986-87 | ₹2,323 |
| 1985-86 | ₹2,125 |
Source: RBI Handbook of Statistics, Table 35, the yearly average gold price in Mumbai.
Pros and cons
Good things
- Nothing to store. No locker, no purity worries.
- No GST or making charges. You pay a small yearly fee instead.
- Easy to buy and sell. ETFs trade every market day; funds can be sold on any working day.
- Regulated. SEBI's rules for mutual funds apply.
Things to watch
- No interest. You gain only if gold's price rises.
- Long flat spells. After 2012-13, RBI's yearly average price didn't beat that level again until 2018-19.
- Fees every year. About 0.6% for an ETF and 0.75% for a fund.
- ETFs need a demat account. And you pay brokerage. Gold funds avoid this.
- No tax exemption. Unlike shares, there's no ₹1.25 lakh a year of tax-free gains.
Is it right for you?
Mistakes to avoid
- Putting everything in gold. It pays no interest and can stay flat for years; it works better as one part of your savings.
- Choosing only on last year's return. Every gold ETF holds the same gold; compare their fees and how much they trade.
How to start
- For an ETF: open a demat and trading account with a broker, pick a gold ETF with a low fee and good trading volume, and buy units like a share.
- For a gold fund: pick the direct plan of a gold fund on a mutual fund app or the fund company's website.
- Invest once, or set up a monthly SIP.
Words you'll see
- ETF
- Exchange traded fund: a fund whose units trade on the stock exchange.
- Expense ratio
- The fund's yearly fee, taken out of its value.
- Fund of funds
- A fund that invests in other funds; a gold fund invests in gold ETFs.
- Demat account
- An account that holds shares and ETF units electronically.
This guide explains how things work. It is not advice on what you should invest in. NetReturns is not SEBI-registered.