Difference Between Gold ETF and Silver ETF

Investing in gold and silver used to be a task in the earlier days, you would have to go to a trusted jeweller, look into the purity, pay making charges, and then look for a safe locker to place them. But now, there’s an easier way for buying called an Exchange Traded Fund, or ETF.

ETFs are investment products where you can buy and sell these metals in the stock market, just like company shares. For precious metals, knowing how to invest in gold and silver ETF products is a game-changer. Both gold and silver ETFs let you invest in these metals easily, without any hassle. But there is a difference between Gold and Silver ETF and in this blog we will break down the gold and silver ETF options to help you see which is right for you.

What are Gold ETFs? 

It’s an investment that simply follows the market price of pure gold. A fund company buys big bars of pure gold and stores them safely in their vaults. For every gram of gold they own, they create one ‘unit’ of the Gold ETF. When you buy one unit on the stock market, you’re buying one gram of gold in electronic form. Investors just need a Demat and trading account, the same one that is used for stocks.

Advantages of a Gold ETF

• Cheap and Easy: Forget about the making charges and locker fees as in Gold ETFs, you only pay a tiny annual fee and a small brokerage charge when you trade online.
• Pure and Transparent: You get 99.5% pure gold, guaranteed and the price is the same for everyone across India, unlike at jewellery shops where prices may vary.
• Buy and Sell Anytime: You can trade Gold ETFs anytime during the stock market hours. You can start with just one gram and sell easily without hunting for a buyer.

Disadvantages of a Gold ETF

• No Regular Payouts: Unlike a Fixed Deposit, a Gold ETF doesn’t pay you interest on your investment. You only make money if the price of gold goes up.
• Market Risk: The value of your ETF goes up and down if the price of gold fluctuates and value goes down if  gold’s price falls.
• No Physical Possession: With an ETF, investors own just a paper (in your Demat account), but you can’t touch it physically or wear it to a wedding.

Read Also: List of Best Gold ETFs in India

What are Silver ETFs?

A Silver ETF is just like a Gold ETF, but for silver. A fund company in the similar way buys pure silver bars, stores them in vaults, and issues units that can be traded on the stock market. They are newer as compared to Gold ETFs options in India but they work completely the same.

Advantages of a Silver ETF

• Affordable: Silver is much cheaper than gold, making it easy for new investors who want to put their money in metals.
• Industries Need: Silver is used in everything from smartphones, solar panels and even electric cars. It has a huge industrial demand that can really push its price up.
• Grow Faster: Because its price is tied to industrial growth, silver can grow rapidly. In a booming economy silver prices can shoot up, potentially giving you higher returns.

Disadvantages of a Silver ETF

• Price Swings: That industrial demand is a double-edged sword. If the economy slows down, silver’s price can fall rapidly, they are much more volatile than gold, which means it’s a riskier investment.
• Not Popular: In India, most of the people trade in Gold ETFs, meaning Silver ETFs are less “liquid” and it might be a bit harder to sell your units at the exact price and time you want.
• Tracking Error: Like any ETF, there can be a small difference between the ETF’s return and the actual price of silver. Though SEBI keeps this error low, it’s good to know it exists.

Similarities Between Gold and Silver ETF Funds.

• Traded Like Stocks: You can easily invest in these ETFs on the stock exchange (NSE/BSE) using your Demat account and Trading account.
• No Physical Possession: Both are safe from physical problems of storage, purity checks, and theft.
• Clear Pricing: You can see the live prices for both ETFs anytime during the market hours.
• Low Costs: They are passively managed by funds, so their annual fees (expense ratios) are usually very low.
• Portfolio Enhancement: Both gold and silver can help in balancing your investments. Their prices often move differently from the stock market, which helps lower your overall risk.

Read Also: Best Silver Mutual Funds to invest in India

Differences Between Gold ETFs vs. Silver ETFs

The real choice comes down to what you want from your investment. One is about safety, the other is about growth.

Feature	Gold ETF	Silver ETF
Main Job	People buy it to protect their money during bad economic times and fight inflation.	People buy it when they think the economy and industries will grow fast.
Price Driver	Depending upon demand, central bank policies and global uncertainty.	Depending upon industrial demand and investors actions.
Price Swings	The price moves up and down, but usually remains stable.	Very volatile. The price can shoot up or crash down sharply, making it volatile.
Trading Popularity	Very popular and highly liquid.	Less popular than gold and comparatively less liquid.
Cost to Buy	More expensive per gram.	Much cheaper per gram, so it’s easier to get started.
Best Suitable For	Cautious investors who want stability and are thinking of long-term investments.	Investors who are comfortable with risk and are hoping for faster growth.

Gold ETF vs. Silver ETF: Where Should You Invest?

You should consider the following before making the right decision:

1. How much risk can I handle as an investor and are you ready for the market fluctuations? If you are looking for steady investment that grows with time then  Gold ETFs can be a beneficial option for your investment as they are less volatile compared to shares or stocks. On the other hand if you are looking for a good growth as well as higher risk as compared to gold then Silver ETF could be exciting, but you need to be ready for the ups and downs of this metal.
2. Gold ETFs are preferred if you don’t minimise the risk and looking for a stable investment option in the market, however looking for a high potential gain and risk attached, silver can be the right investment as it is directly linked to the economy, if the economy rises silver will automatically rise but if there is a slowdown then you can even expect less return on your investment. 

The investment done in these ETFs are taxed on the profit you make by selling these ETFs, also the rules have changed and now there is a higher tax levied on your long term profits. 

Read Also: Top Gold Mutual Funds in India

Conclusion

Gold and Silver ETFs have made it easier for Indian investors to put their money directly in these precious metals. These investments have removed all the primitive old ways like possessing these metals physically, checking the purity of the product and paying for the locker to keep your gold or silver safe.

Gold offers you stability, a safe place for your money when things get rough. Silver offers you a shot at higher growth, tied to the world’s industries, but with more risk. Neither one is better than the other, the best one is simply the one that is suitable as per your financial planning.

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