Partner With Us NRI

Open Free Demat Account Online with ICICIDIRECT

Comparison between Gold ETF and Gold Futures

Gold ETF

A gold ETF is a commodity exchange-traded fund that can be used to gain exposure to the price increase in the gold. Gold ETFs trade on a stock exchange just like a normal stock or equity but derives its value from holding 'underlying assets' that is Gold.

Cost of Buying an ETF

Demat account charges on an annual basis.
Brokerage charges on both buying and selling.
Fund Management Expenses. This could be up to 1 % of the fund value. Lower the expenses, higher the return.

Gold Futures:

In the trading of futures, "rollover" refers to the process of closing out open positions in soon-to- expire contracts in favor of contracts with later expiration dates. Rollover is a key aspect of futures trading that must be accounted for, as it directly impacts the bottom line of the trading account.

In the process of rollover there is a rollover yield. A rollover yield could be positive or negative depending on market situation. In a backwardation market (where future price is lesser than current price), a rollover yield would be positive and in a contango market, the rollover yield would be negative. For e.g. current month expiry Gold Futures is trading at Rs 50,000 and next month at Rs 49,000. This is a backwardation market and a rollover cost would be positive. Futures contract of current month expiry would be closed(squared off) at Rs 50,000 and a position in next month Futures contract could be taken at Rs 49,000 (lesser price hence lesser margin requirement).

Rollover Yield would be calculated as :{( Next Month Futures Price-Current Month Futures Price)/ Current Month Futures Price} *100

If a Gold Futures is rolled over multiple times then there could be both positive and negative rollover yields at different rollovers.

In addition to roll-over yield there would be other charges in Futures Trading.

Overall cost of trading in Gold Futures could be enumerated as below: Broker Account opening charges, Demat account is not required, Cost of Margin Funding, Rollover Yield. Let’s understand Comparison between Gold ETF and Gold Futures on the basis of Return on Investment (ROI)

Return on Investment



what would be the return if a position is taken in Gold ETF compared to Gold Futures with the same amount of money? A trader would be interested to know which option would provide better returns


Gold ETF

Gold Futures (Mini)

Initial Investment


100,000 (as margin, @10%)

Purchase Value


Rs 1,000,000 (Notional Value)


20 gms (approx.)

200 gms

Price Movement (Tick Value in the case of Futures Contract)

@ Rs per 10 gms

@ Rs per 10 gms

Total Price Movement per 10 gms

Rs 1,000

Rs 1,000


2% [{(1000/10)*20}/100,000]



Note: The above table is for illustration purpose only and should not considered as invitation to trade.

# Net ROI would be calculated by adjusting rollover yield and other charges like brokerage, etc.

In a scenario if price of the gold goes down by Rs 1,000 per 10 gms then the loss in terms of percentage in Gold ETF and Gold Futures would be same; i.e. by 2% in Gold ETF and 20% in Gold Futures. Reason that percentage loss or gain is higher in Gold Futures is that Futures allow leverage by paying margin amount and not the entire purchase value.

Gold Futures for Hedging

Gold Futures could be used as a hedging tool. Depending upon the scenario, an individual can either take a long or short position in Gold Futures to hedge against the unfavorable price movement; for example, if an individual has to buy approx. 100 gms gold after one month and the gold price is volatile then the individual could take a long position in Gold Futures (i.e. buy Gold Futures). Similarly, if a jeweler wants to lock in a price for a delivery expected after one month and the price is not fixed then the jeweler can hedge the adverse price movement by taking a short position in Gold Futures (i.e. sell Gold Futures)

Both Gold ETF and Futures contracts are used for trading and investment in gold. However, Gold Futures has advantages over Gold ETF in terms of ROI and can also be used for hedging. For more details on Commodity, visit our website www.icicidirect.com

About the author: Pankaj Agarwal is a part of Commodity and Currency team at ICICI Securities limited. He has more than a decade experience in Learning & Development in BFSI area also in financial product distribution and personal financial planning. The views expressed in the article are personal views of the author and do not necessarily represent the views of ICICI Securities.


ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470. I-Sec is a Member of National Stock Exchange of India Ltd (Member Code :07730) and BSE Ltd (Member Code :103), MCX (Member Code: 56250) and having SEBI registration no. INZ000183631. Name of the Compliance officer (broking): Mr. Anoop Goyal, Contact number: 022-40701000, E-mail address: complianceofficer@icicisecurities.com. Investment in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.

Most Popular

  • 13 May 2022
  • ICICI Securities

The Five-Point Financial Planning Checklist For Your Family

Whether you just got married or planning to have a baby or have dependents, you should have financial plans for every stage in your life to ensure a secured future for your family members. Here are five things you can do financially for your family.   

  • 12 May 2022
  • ICICI Securities

What is a Zero Coupon Bond?

You get fixed returns in the form of interest until maturity when you invest in a bond. Zero-coupon bonds work a little differently. In this article, find out what zero-coupon bonds are, their advantages and whether you should invest in them. 

  • 12 May 2022
  • ICICI Securities

What are Cross Currency Pairs?

The forex market is the largest financial market globally. Currency trading is a lucrative and booming business. While most currencies trading happens in relation to the US Dollar, some don’t. That forms the basis of cross currency pairs. Here’s what you need to know about it. 

  • 12 May 2022
  • ICICI Securities

Investing principles from Benjamin Graham: The Father of Value Investing

Benjamin Graham was a British born economist, professor, and investor who taught at Columbia University. He was also a mentor to some of the most famous investors of the 20th century, including Irving Khan, John Templeton, & Warren Buffett. Buffett called him "the second most influential figure in his life, only after my father". 

  • 12 May 2022
  • ICICI Securities

How to Invest in Nifty 50?

The Nifty 50 is the benchmark index of the National Stock Exchange. It represents the 50 largest companies listed in India. Investing in the Nifty 50 can be a good idea for those looking to make index-linked returns. Here’s how you can invest in the index. 

  • 12 May 2022
  • ICICI Securities

Investment philosophy of Cathie Wood: The most powerful woman on Wall Street

Catherine Duddy Wood, also called Cathie Wood, is an investor who primarily invests in disruptive technologies and is the founder, chief executive officer, and chief investment officer of ARK Investment Management, LLC, an investment management firm mostly active in the United States.

  • 11 May 2022
  • ICICI Securities

How to Use Technology to Improve Your Finances

Technology has made life simpler for everyone. In the realm of personal finance, technology has streamlined many processes—from budgeting to automating your payments. On National Technology Day, let’s look at how technology has transformed our finances. 

  • 11 May 2022
  • ICICI Securities

How to Invest in your Every Goal with Mutual Funds?

Each of us is unique. We have different needs and goals in life. Some of us can ride along swinging markets, while some may need a relatively conservative investment tool. 

  • 11 May 2022
  • ICICI Securities

Four Reasons Why Entrepreneurs should Invest in Equity Mutual Funds

Equity mutual funds provide growth opportunities not just for individual investors but also for entrepreneurs and corporates. They make excellent investments for anyone looking for wealth creation. This article will give you four reasons why businesspeople should consider investing in equity mutual funds.