Consider the following statements: 1. Gold

Solution

• Statement 1 is correct: Gold ETF, or Exchange Traded Fund, is a commodity-based Mutual Fund that invests in assets like gold. These exchangetraded funds perform like individual stocks and are traded similarly on the stock exchange. Exchange-traded funds represent assets, in this case, physical gold, both in dematerialised and paper form. • Some of the benefits of investing in Gold ETF funds are: Easier trading è No entry or exit loads Less Market Risk Tax benefits – Other than capital gains tax, gold exchange traded funds do not attract VAT, Securities Transaction Tax or Value Added Taxes, allowing an individual to save taxes on their investment. Usage as collateral • Statement 2 is incorrect: Also investment in gold ETF will help decrease the current account deficit as gold imports will reduce.