What Are Gold BeES and How Do They Work?

Traditionally, gold has been people’s first choice regarding investment and savings. Almost every Indian has gold as coins, bars or jewellery in their locker. The reason is gold is considered a valuable, safe and secure asset. 

However, investing in this asset has a lot of troubles like the risk of theft, storage expenses, high making charges, etc. Thus, investors gradually shift from traditional to modern gold investments like Gold BeEs. 

Read to know more about this asset.  

What Are Gold BeES?

The term Gold BeES stands for Gold Benchmark Exchange Traded Schemes. They are open-ended Exchange-Traded Funds (ETF) whose goal is primarily to reflect the price movements of physical gold. 

A single unit of this fund equals 0.01 gram of gold in dematerialised or paper form and is backed by physical gold bullions of 99.5% purity. Being exchange-traded funds, you can buy and sell them on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). You can find these schemes in the cash segment of both exchanges and transact them continuously at market prices.

How Do Gold BeES Work?

Since these are listed on stock exchanges, you can buy through your demat account. The minimum investment in gold BeES is the prevailing cash amount approximately equal to 0.01 gram of physical gold.

Since the demand for gold is generally high, it can easily be traded on the stock exchange. The price of the ETFs is publicly available on the stock exchange, which is similar to the pricing of physical gold with respect to the per gram value. This makes the transaction transparent and eases investing in Gold ETF units.

Unlike physical gold, you do not have to worry about their gold ETFs being stolen. Furthermore, you do not have to think about where to store them or pay the additional costs like a bank locker.

Benefits of Investing in Gold BeES

Here are a few benefits that you will get by investing in Gold BeES:

High Liquidity

One of the greatest benefits of investing in Gold BeES is its high liquidity. You can easily sell your holdings at the prevailing market price during a trading session. 

Cost Effective

The brokerage fees in the case of this scheme are way less than investments made in physical gold. Moreover, there is no entry or exit load. 

Flexible and Secure Transactions

You can buy and sell Gold BeES anytime during trading hours and store them in your online Demat account. 

There are no additional storage or insurance expenses as your assets are stored digitally. Furthermore, there is also no possibility of misplacement or theft.   

Ability to Purchase in Small Quantities

You can buy Gold BeES in minimal quantities compared to other gold investments. For example, while purchasing gold bonds, the minimum quantity is 1 gram. However, in the case of the latter, you can start investing by purchasing just 0.01 grams. 

Serves as a Trading Margin

Gold BeES investments can be used as a trading margin. Thus, you can use them as collateral on stock exchanges. 

Disadvantages of Investing in Gold BeES

Liquidity risk

While gold ETFs are easier to buy and sell than physical gold, they might not be as liquid as other financial assets like stocks and bonds, making it harder to trade in large amounts quickly.

Price volatility

The price of gold can be quite volatile, which can cause the value of your investment to fluctuate widely.

Market risk

Various economic and geopolitical factors influence the price of gold, so there is always the risk that your investment could decline.

Market inefficiencies

The market for gold ETFs can be less efficient than other financial markets, making it harder to determine the true value of your investment.

Counterparty risk

When investing in gold ETFs, you rely on the ETF provider to hold the underlying assets and manage the fund properly, so there is always the risk that the ETF provider could default or otherwise mismanage the fund.

List of Gold BeES Available in India

The following is the list of the famous Gold BeES available in India:

• Axis Gold ETF
• Nippon India ETF Gold BeES
• Invesco India Gold ETF
• UTI GOLD Exchange Traded Fund
• IDBI Gold ETF
• HDFC Gold Exchange Traded Fund
• Canara Robeco Gold ETF

Taxation of Gold BeES

If you hold your investment for less than 36 months, short-term capital gains tax will be applicable. STCG will be taxed as per your applicable tax slab. 

On the other hand, if you hold on to your assets for more than 3 years, you will have to pay taxes on long-term capital gains (LTCG). In this regard, the tax rate would be 20% with indexation benefits. 

With recent changes in Budget 2023 above taxation has changed for an investor buying on or after 01st April 2023:

All the gains now will be classified as short-term capital gains, and taxation will be as per your applicable tax slab.

How to Invest in Gold BeES?

The steps to invest in Gold BeES are as follows:

• Step 1: Visit the website or app of your preferred broker. 
• Step 2: Open a Demat and trading account by furnishing the required documents. Remember to link your bank account to your Demat account. 
• Step 3: Choose a Gold BeES and place an order for a set number of units. 
• Step 4: Check for the confirmation on your phone or e-mail. Once the order is placed, a brokerage amount will be levied on your transaction. 

Final Word

Investing in Gold BeES is a safe and effective way to invest in gold. It is a great way to diversify your portfolio and negate the hassles of purchasing physical gold. Before investing, the Net Asset Value (NAV) of Gold BeES can fluctuate based on market trends.

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