List of Best Commodity ETFs in India

In case you have ever questioned yourself about how to hedge your investments against inflation or market fluctuations, one of the alternatives that you can consider is commodity ETFs. They have become a popular investment choice among Indian investors who want to invest in gold, silver and other commodities in a convenient manner without holding them. We will discuss what is meant by commodity ETFs, why they are important and which ETFs are the best in India.

Commodity ETFs – An Overview 

A Commodity ETF (Exchange-Traded Fund) lets you invest in a commodity, like gold or silver, in the stock market. Instead of buying physical gold bars or silver coins, you can buy units of an ETF that mirrors the price of that commodity. Some ETFs hold actual physical commodities in vaults, while others track prices through futures contracts. Either way, you get exposure to the commodity’s performance without worrying about storage, purity checks, or insurance. In India, most commodity ETFs focus on gold and silver. 

Types of Commodity ETFs 

1. Gold ETFs 

Gold ETFs are the most popular commodity ETFs in India. They invest in physical gold of 99.5% purity and replicate the price of domestic gold. Each unit usually represents 1 gram of gold, so you can buy or sell them on the stock exchange, similar to shares, without worrying about purity, storage, or making charges. 

2. Silver ETFs 

If gold feels a little too traditional, Silver ETFs can be a good option. They work just like gold ETFs but track the price of physical silver (usually 99.9% purity). Silver has both investment and industrial demand, which means it can be a bit more volatile, but also offers great growth possibilities when global demand spikes.

3. Futures-Based Commodity ETFs  

Some ETFs do not hold physical gold or silver; instead, they invest in commodity futures contracts. This means their returns depend on how those futures perform, which can make them a little more complex to understand. They are influenced by factors like contango and backwardation (basically, how future prices compare to current prices). These are common abroad (for crude oil or agriculture), but still new in India.

4. Multi-Commodity or Basket ETFs 

Multi-Commodity ETFs (also called basket ETFs) invest in a mix of commodities like metals, energy, or even agriculture. They do not depend on the performance of a single metal like gold or silver. Instead, they track an index made up of multiple commodities, offering more balanced exposure.

Read Also: List of Best Gold ETFs in India

Best Commodity ETFs in India 

Company	Market Cap. (Crores)	Expense Ratio %	52 Week High	52 Week Low
Nippon India ETF Gold BeES	₹29,323	0.80	₹108.69	₹61.67
SBI Gold ETF	₹12,134	0.70	₹112.23	₹62.85
HDFC Gold ETF	₹14,053	0.59	₹112.80	₹63.60
ICICI Prudential Silver ETF	₹9,481	0.40	₹190	₹86
Kotak Silver ETF	₹2,018	0.45	₹178.98	₹81.80

1. Nippon India ETF Gold BeES

One of the oldest and most trusted gold ETFs in the Indian market, Nippon India ETF Gold BeES directly tracks the price of gold in the domestic market. It’s highly liquid and backed by physical gold stored in vaults with an expense ratio of around 0.80%
It is reliable, easy to trade, and a great way to get exposure to gold without worrying about storage or purity.

2. SBI Gold ETF

Managed by one of the largest and most respected AMCs in India, the SBI Gold ETF is another solid option for gold investors. It mirrors domestic gold prices and ensures full backing by physical gold with an expense ratio of around 0.70%. It is considered ideal for conservative investors looking for safety and steady performance linked to gold prices.

3. HDFC Gold ETF

The HDFC Gold ETF combines brand trust with solid tracking performance. It’s known for tight tracking errors and ease of liquidity on the exchange, with an expense ratio of 0.59%. It is low-cost, and strong liquidity makes it a go-to for many investors.

4. ICICI Prudential Silver ETF

If you are looking to diversify beyond gold, silver ETFs are worth exploring. ICICI Prudential Silver ETF gives direct exposure to silver prices and is ideal for investors who believe silver has long-term potential in both industry and investment. The underlying Asset is physical silver, and the expense ratio is 0.40%. It is great for diversification and tapping into the growing industrial demand for silver.

5. Kotak Silver ETF

Another good choice for silver exposure, Kotak Silver ETF provides returns closely in line with domestic silver prices. The expense ratio is around 0.45% and is backed by physical silver and is easy to trade, making it a convenient way to participate in silver’s price movements.

How to Choose the Right Commodity ETF 

Choosing the best ETF for you depends on your goals. Below are a few points to keep in mind while choosing an ETF;

1. Check the expense ratio – Lower fees mean you will get more returns
2. Look at tracking error – A good ETF should closely mirror the actual price of the commodity.
3. Pay attention to liquidity – Higher trading volume ensures you can buy and sell easily without big price gaps.
4. Review AUM (Assets Under Management) – Larger funds tend to be more stable and better managed.
5. Know what you are investing in – Physical ETFs are simpler, while futures-based ones can be affected by price rollovers.

Read Also: Best ETFs in India to Invest

Taxation of Commodity ETF 

Before you invest, you should know how your returns will be taxed because taxes can quietly eat away your profits. 

Commodity ETFs, whether they track gold, silver, or a mix of other commodities, are not considered like equity investments. They follow a different set of tax rules.

1. Short-Term Capital Gains (STCG)

If you sell your ETF within 12 months of buying it, your gains are taxed as a short-term capital gain, which means they get added to your total income and are taxed according to your income tax slab. 

Example – Suppose you buy a Gold ETF for ₹1,00,000 and sell it after 8 months for ₹1,15,000.
That ₹15,000 profit will be taxed as per your slab, which can be 10%, 20%, or 30%, depending on which income tax bracket you fall in.

2. Long-Term Capital Gains (LTCG)

If you hold your Commodity ETF for more than 12 months, your profit becomes a long-term capital gain, and you pay a flat 12.5% tax on it. Remember, there is no indexation benefit anymore. Earlier, investors could adjust their purchase price for inflation, which helped reduce taxable gains. But under the latest tax rules, that benefit is gone.  

Example – Let us say you buy ₹1,00,000 worth of Gold ETF in January 2024. After holding them for about 15 months, you sell them in April 2025 for ₹1,30,000, and you have a profit of ₹30,000.

Since you held it for more than 12 months, it qualifies as a long-term capital gain. So, your tax will be 12.5% of ₹30,000, which equals ₹3,750

3. Securities Transaction Tax (STT)

STT is not levied on Gold, Liquid, GILT ETFs, and some international ETFs. Although STT is levied on other ETFs.

Read Also: Small-Cap ETFs to Invest in India

Conclusion 

Commodity ETFs transfer the ancient charm of gold and silver to a new, digital era. They are liquid and can be traded easily, hence being an ideal choice for investors who wish to diversify other than stocks and bonds. However, it is suggested to only invest in known, liquid ETFs of reputable fund houses. And do not forget: while gold and silver glitter, discipline and patience shine even brighter in the long run.

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