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Consider the following statements regarding Gold ETF.
  1. Gold ETFs are passive investment instruments that are based on gold prices and invest in gold bullion.
  2. The price of One Gold ETF unit is equal to 1 gram of gold of at least 99.5 percent purity.
  3. Gold ETFs can be redeemed for physical gold.
Which of the above statements is/are correct?
  • a)
    1 only
  • b)
    1,2
  • c)
    1,3
  • d)
    1,2,3
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
Consider the following statements regarding Gold ETF. Gold ETFs are pa...
Gold ETF
Gold ETFs (Exchange Traded Funds) are investment instruments that are designed to track the price of gold and invest in physical gold bullion. They are a popular choice for investors who want to gain exposure to the gold market without actually owning physical gold. Let's analyze the given statements to determine their correctness.

Statement 1: Gold ETFs are passive investment instruments that are based on gold prices and invest in gold bullion.

This statement is correct. Gold ETFs are passive investment instruments, meaning they aim to replicate the performance of the underlying asset, which in this case is gold. These funds invest in physical gold bullion or hold gold derivatives, such as futures contracts, to track the price movements of gold. By investing in gold ETFs, investors can gain exposure to the gold market without the need to directly own physical gold.

Statement 2: The price of One Gold ETF unit is equal to 1 gram of gold of at least 99.5 percent purity.

This statement is incorrect. The price of one Gold ETF unit is not necessarily equal to 1 gram of gold. The price of a Gold ETF unit is determined by the market and can vary based on factors such as demand and supply. The underlying value of the Gold ETF is determined by the price of gold, but the unit price may not be directly linked to the weight or purity of gold.

Statement 3: Gold ETFs can be redeemed for physical gold.

This statement is correct. Gold ETFs provide investors with the flexibility to convert their holdings into physical gold if desired. This is known as redemption. However, it is important to note that redemption processes and requirements may vary among different Gold ETFs. Investors should carefully review the terms and conditions of the specific Gold ETF they are investing in to understand the redemption process.

In conclusion, out of the given statements, statement 1 and statement 3 are correct. Gold ETFs are passive investment instruments that are based on gold prices and invest in gold bullion. They also offer the option for investors to redeem their holdings for physical gold. However, statement 2 is incorrect as the price of one Gold ETF unit is not necessarily equal to 1 gram of gold.
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Consider the following statements regarding Gold ETF. Gold ETFs are pa...
A Gold ETF is an exchange-traded fund (ETF) that aims to track the domestic physical gold price. They are passive investment instruments that are based on gold prices and invest in gold bullion.
One Gold ETF unit is equal to 1 gram of gold and is backed by physical gold of very high purity. Gold ETFs combine the flexibility of stock investment and the simplicity of gold investments.
Gold ETFs are listed and traded on the National Stock Exchange of India (NSE) and Bombay Stock Exchange Ltd. (BSE) like a stock of any company. Gold ETFs trade on the cash segment of BSE & NSE, like any other company stock, and can be bought and sold continuously at market prices.
Buying Gold ETFs means you are purchasing gold in an electronic form. You can buy and sell gold ETFs just as you would trade in stocks. When you actually redeem Gold ETF, you don’t get physical gold, but receive the cash equivalent. Trading of gold ETFs takes place through a dematerialised account (Demat) and a broker, which makes it an extremely convenient way of electronically investing in gold.
Because of its direct gold pricing, there is a complete transparency on the holdings of a Gold ETF. Further due to its unique structure and creation mechanism, the ETFs have much lower expenses as compared to physical gold investments.
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Consider the following statements regarding Gold ETF. Gold ETFs are passive investment instruments that are based on gold prices and invest in gold bullion. The price of One Gold ETF unit is equal to 1 gram of gold of at least 99.5 percent purity. Gold ETFs can be redeemed for physical gold.Which of the above statements is/are correct?a)1 onlyb)1,2c)1,3d)1,2,3Correct answer is option 'B'. Can you explain this answer?
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