Gold & Silver Funds — What They Are and How to Use Them

Gold and Silver funds/ETFs give commodity exposure without handling physical metal. They generally track domestic prices (via London spot + FX, import duties, costs) and can diversify equity‑heavy portfolios.

Crisis Hedge Diversification Simple & Liquid

How These Funds Work

  • Gold ETF: Buys gold of prescribed purity; NAV aims to mirror domestic gold price. Traded on exchanges (requires demat/broker).
  • Gold Fund (FoF): A mutual fund that invests in a Gold ETF — no demat needed; you invest like any other MF.
  • Silver ETF: Holds silver to track domestic silver prices; traded on exchanges.
  • Silver Fund (FoF): A mutual fund that invests in a Silver ETF — demat not required.

Why Consider Gold/Silver Funds

1) Hedge & Stability

Gold often holds value during stress; silver can participate in both precious‑metal and industrial cycles.

2) Easy Access

ETFs for demat users; FoFs for regular MF investors. SIPs available in FoFs.

3) Portfolio Diversifier

Low correlation to equities can reduce overall portfolio volatility. Typical allocation: 5–15% across cycles.

Key Risks & Notes

  • Tracking error & costs: Expense ratio, custody, and spread can cause small divergence from the benchmark price.
  • Currency & duty impact: INR moves and import duties affect local metal prices vs global quotes.
  • Volatility: Silver is generally more volatile than gold; size allocations accordingly.
  • Taxation (Indicative): Gold/Silver funds/ETFs are not treated as domestic equity; check the latest tax rules and each scheme’s SID/KIM.

Live Examples

Gold ETFs

Gold Funds (FoF)

Silver ETFs

Silver Funds (FoF)

How to Use in a Portfolio

  1. Decide allocation: Many investors use 5–10% in gold; add silver (2–5%) if you want industrial‑cycle participation.
  2. Choose route: Demat users may prefer ETFs; others can use FoFs (SIP friendly).
  3. Rebalance yearly: Trim back to target weights to lock in gains after sharp moves.

Bottom Line

Gold and silver can cushion portfolios during stress and add diversification. Pick the vehicle (ETF vs FoF) that suits your setup, keep costs low, and size sensibly.

Education only; not investment advice. Past performance is not indicative of future results. Review scheme documents and current tax rules before investing.