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MUMBAI: By offering gold-backed investment products like the Gold Exchange Traded Fund (GETF), investors will get the opportunity of saving in gold in a more cost-effective and convenient way through the banks and mutual fund sector, according to Mr Sanjeev Agarwal, Managing Director, Indian sub-continent, World Gold Council.

Commenting on the Finance Minister's announcement to permit the fund, he said: "About Rs 6,000 crore of Indian household savings is invested in physical gold bars and coins every year, in addition to the gold jewellery purchase. At present, the entire Rs 6,000-crore worth of gold is purchased through the informal channels."

A gold ETF is an exchange-traded fund where the shares or units are invested in gold bullion.

By investing in this, an investor can purchase any amount of gold ranging from a single gram to a couple of kg, where the cost of purchase would be less than half of that he currently incurs on physical gold, Mr Agarwal said.

At present, an investor would be paying between 3 per cent and 6 per cent over and above the price to cover inventory carrying and other costs related to the purchase of physical gold.In addition, he has to incur insurance cost and locker charges for storage. There are also various risks attached to holding physical gold.

(This article was published in the Business Line print edition dated March 3, 2005)
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