Gold ETF vs Gold Mutual Fund: Which Is Better?

If you have ever thought about investing in gold but felt confused about where to start, you are not alone. Most people I talk to ask the same question: Should I go for a gold ETF or a gold mutual fund? Both options let you invest in gold without buying physical jewellery, but they work quite differently.

In this article, I will break down the gold ETF vs gold mutual fund debate in the simplest way possible. By the end, you will know exactly which one suits your situation no finance degree needed. If you're comparing different investment options, our guide on mutual funds vs index funds can help you understand the broader mutual fund landscape.

What Is a Gold ETF?

A gold ETF (Exchange Traded Fund) is basically a fund that tracks the price of physical gold. When you buy one unit of a gold ETF investment, it is equivalent to owning approximately 1 gram of 99.5% pure gold but in digital form.

Here is the key thing to understand: gold ETFs are traded on stock exchanges, just like company shares. So if you want to buy or sell, you need a Demat account and a trading account.

Gold ETF meaning in simple terms: Think of it as buying gold, but instead of keeping it at home, it sits in a vault and you hold a digital certificate for it.

Some of the top gold ETF funds in India include offerings from SBI, HDFC, Nippon India, and Axis Mutual Fund. If you want to compare their performance side by side, tools like the Dhanarthi stock screener can make the job easier.

What Is a Gold Mutual Fund?

A gold mutual fund (also called a gold fund) is a type of mutual fund that invests in Gold ETFs. So in a way, it is one step removed from the ETF itself.

What is a gold fund exactly? It is a fund of funds your money goes into the fund, the fund manager invests that money into Gold ETFs, and you benefit from the price movement of gold.

The biggest advantage? You do not need a Demat account. You can start with as little as ₹500 per month through a SIP (Systematic Investment Plan).

This makes gold mutual funds incredibly accessible for beginners and salaried investors who want to invest small amounts regularly.

Gold ETF vs Gold Mutual Fund – Key Differences

Both options give you exposure to gold prices, but the way they work is quite different. Let me lay this out clearly so there is no confusion.

The difference between gold ETF and gold mutual fund really comes down to three things: convenience, cost, and flexibility.

Gold ETFs win on cost their expense ratios are generally lower. Gold mutual funds win on accessibility no Demat account, SIP-friendly, and easier for beginners to get started.

Here is something interesting: if you already have a Demat account and invest actively, a gold ETF might save you money in the long run. But if you are a passive investor who just wants to automate monthly gold savings, a gold fund vs gold ETF comparison will almost always point you toward the mutual fund route.

Top 5 Gold ETFs in India (2026)

If you have decided that a Gold ETF suits your style, here are the top gold ETF funds in India worth considering. All of these are listed on NSE and have strong liquidity and a solid track record.

1. Nippon India ETF Gold BEES

This is the oldest and most liquid gold ETF in India. It has high trading volumes, which means you can buy and sell easily without worrying about price impact. A great first choice for beginners entering the ETF space. For a comprehensive comparison of all gold ETF options, check out our detailed guide on the best gold ETF in India.

2. SBI ETF Gold

Backed by India's largest bank, SBI ETF Gold is known for its reliability and consistent tracking of gold prices. It is one of the best gold ETF in India options for conservative investors who prefer a trusted name.

3. HDFC Gold ETF

HDFC Gold ETF offers a very low tracking error, meaning it closely mirrors actual gold prices. It is a solid pick if cost efficiency and accuracy of tracking are your top priorities.

4. Axis Gold ETF

A relatively newer entrant but has built a good reputation for low expense ratio and transparent fund management. A good gold etf fund in India for those already investing in Axis Mutual Fund products.

5. Kotak Gold ETF

Kotak Gold ETF is another well-managed option with decent liquidity on exchanges. It suits investors who are comfortable with the Kotak ecosystem and want to keep all their investments on one platform.

Quick Tip: Always check the expense ratio and tracking error before choosing a gold ETF. A lower tracking error means the ETF is doing a better job of mirroring gold prices.

Top 5 Gold Mutual Funds in India (2026)

If the mutual fund route suits you better, here are the top 5 gold mutual funds in India that consistently perform well. All of these allow SIP starting from ₹500 and do not require a Demat account.

1. Nippon India Gold Savings Fund

This fund invests in Nippon India ETF Gold BeES, which is the most liquid gold ETF in India. It is one of the best gold mutual funds in India for SIP investors who want simplicity and reliability in one package.

2. SBI Gold Fund

SBI Gold Fund is a favourite among conservative investors. It has a strong brand, a long track record, and invests directly in SBI ETF Gold. A dependable choice for anyone just starting their gold ETF investment journey through the mutual fund route. If you're interested in SIP investing more broadly, our guide on best mutual funds investment SIP plans covers other excellent options.

3. HDFC Gold Fund

HDFC Gold Fund invests in HDFC Gold ETF and is known for its low tracking error and disciplined fund management. If you are looking for one of the best gold ETF funds available through the mutual fund wrapper, this is a strong contender.

4. Axis Gold Fund

Axis Gold Fund is a good option for investors who prefer the Axis platform. It has a competitive expense ratio and a straightforward investment process. Ideal for beginners who want to start a monthly SIP in gold without any complexity.

5. Kotak Gold Fund

Kotak Gold Fund rounds out this list with consistent performance and easy accessibility on most mutual fund platforms. It is a solid pick for those who want steady, long-term gold exposure without actively monitoring the market.

Taxation – Gold ETF vs Gold Mutual Fund

This is one area where most people get confused, so let me keep it simple.

As of the latest tax rules in India, both gold ETFs and gold mutual funds are taxed the same way:

Short-Term Capital Gains (STCG): If you sell within 24 months, gains are added to your income and taxed as per your income tax slab.

Long-Term Capital Gains (LTCG): If you hold for more than 24 months, gains are taxed at 12.5% without indexation benefit.

The tax treatment is identical for both. So this factor does not give either option a clear advantage. For a complete understanding of tax implications on different investment vehicles, read our detailed article on capital gains tax on IPO and unlisted shares.

One practical tip: always keep your purchase records and holding statements. For help understanding how to read your fund statements or do a basic financial report analysis, resources like Dhanarthi financial analysis tools can guide you through it.

Who Should Invest in Gold ETFs?

Not everyone is the right fit for a gold ETF investment. Here is who it works best for:

• Active investors who already have a Demat and trading account set up.
• Cost-conscious investors who want to minimise expense ratios over the long term.
• Those who want intraday flexibility you can buy and sell gold ETFs during market hours, just like stocks.
• Investors with larger capital since the minimum investment is roughly the price of 1 gram of gold (currently around ₹6,000–₹7,000+), it is better suited for those who can commit that amount upfront.
• People who want direct gold price tracking without any additional fund layer.

Is gold ETF a good investment? Yes if you match the profile above, it is one of the most cost-efficient and transparent ways to invest in gold.

Who Should Invest in Gold Mutual Funds?

Gold mutual funds are designed for a different kind of investor. Here is who benefits most:

• Beginners who are new to investing and do not have a Demat account yet.
• Salaried individuals who want to set up an automatic gold ETF SIP well, technically a gold fund SIP and forget about it.
• Small investors who want to start with ₹500 or ₹1,000 per month.
• Hands-off investors who prefer a simple, fully managed approach.
• Those who find stock market platforms intimidating mutual fund platforms like Zerodha Coin, Groww, or Paytm Money are much more beginner-friendly.

The best gold mutual funds in India include Nippon India Gold Savings Fund, SBI Gold Fund, HDFC Gold Fund, and Axis Gold Fund. All of them invest in their respective Gold ETFs, so the underlying asset is the same.

Which Is Better – Gold ETF or Gold Mutual Fund?

Here is the reality: there is no single right answer.

The gold fund vs gold ETF debate has been going on for years, and the truth is both are good options. The better choice depends entirely on your personal situation.

Choose a Gold ETF if:

• You have a Demat account already active.
• You want lower costs over the long term.
• You prefer intraday liquidity and real-time pricing.
• You can invest in larger chunks (not small monthly amounts).

Choose a Gold Mutual Fund if:

• You do not have a Demat account and do not want to open one.
• You want to invest small amounts through a monthly SIP.
• You prefer a simple, automated investment process.
• You are a beginner who is just getting started with gold investing.

Think about it this way: gold ETFs are for informed, active investors. Gold mutual funds are for systematic, passive investors. Both track the same underlying asset gold so over the long term, the returns are very similar. The difference is really in the experience of investing.

One more thing worth mentioning: both gold ETFs and gold mutual funds are better than physical gold in many ways no making charges, no storage risk, no purity concerns. If you want to understand the broader picture of how different assets perform, doing a basic stock analysis before investing exercise can help you put gold in context within your overall portfolio.

Conclusion

So, to sum it all up, the gold ETF vs gold mutual fund decision comes down to your investment style, your access to a Demat account, and how much you want to invest at a time. If you are an active investor who values cost efficiency and flexibility, go with a gold ETF. If you are a beginner or prefer the SIP route, a gold mutual fund is your best friend. Either way, adding gold to your portfolio is a smart move for diversification and long-term wealth protection. Start small, stay consistent, and let gold do its job.

Disclaimer: This article is for educational purposes only and should not be considered as financial or tax advice. Tax laws are subject to change, and individual circumstances vary. Please consult with a qualified chartered accountant or tax advisor for personalized guidance based on your specific situation.

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