Gold and Silver ETFs are investment products that allow investors to gain exposure to the prices of gold and silver without owning the physical metals. Both funds track the domestic prices of gold and silver (respectively), and are usually structured as ‘physical ETFs.’
This means the fund actually holds physical gold or silver (stored in vaults), in quantities that match the size of the investor pool. So when you buy units of these ETFs, you’re owning a proportionate share of the underlying metal without having to store it yourself.
Want to understand in detail? Read this article to first learn what gold and silver mutual funds are and then see which product may suit you. Lastly, you will check some precious metals ETFs offered by Tata Mutual Fund™.
Table of Content
What is a Gold ETF?
A Gold ETF is a exchange traded funds that buys and holds physical gold on behalf of investors. It trades on the stock exchange, so you can buy or sell it in the same way you trade shares.
Always remember that you do not receive gold in hand. Instead, you own “units”, the price of which moves with the market price of gold. You can trade these ETF units on stock exchanges i.e., NSE or BSE using your demat and trading account.
How do Gold ETFs Work?
When you buy a unit of a Gold ETF, the fund purchases the same amount of physical gold and keeps it with an authorised custodian. The fund does not try to beat the market. It only follows the price of gold.
As a result, the Gold ETF returns may change based on these two primary factors:
International gold prices and
The rupee-dollar (USD/INR) exchange rate (because gold prices are set globally in USD)
Benefits of Gold ETFs
Mostly reputed Gold ETF schemes hold gold of 99.5% purity. Thus, buyers do not need to worry about adulteration, mixing, or quality checks. Additionally,
Gold ETFs are Easy to Buy and Sell:
You can sell your units anytime during market hours.
Physical gold often involves making charges or discounts on resale, which do not apply to ETFs.
Comparatively Lower Costs
You do not pay for storage, insurance, or making charges.
The only cost is the expense ratio, brokerage fees STT/ Exchange fees or other similar charges.
No GST on Purchase
Buying physical gold attracts 3%-5% GST.
However, buying Gold ETFs does not attract such taxes.
What is a Silver ETF?
Just like gold ETFs, silver ETFs are also exchange traded funds that buy and hold physical silver on behalf of investors. They are traded on stock exchanges just like company shares.
Again, when you buy a silver ETF, you do not receive physical silver. Instead, you own units whose value moves with the domestic price of silver.
How do Silver ETFs Work?
Note that in a silver ETFs, silver is the underlying asset. The fund collects money from investors and uses that pool of funds to buy physical silver bars of high purity (usually at least 99.99% purity). This silver is stored in secure vaults managed by authorised custodian banks.
The price of each unit of a silver ETF is linked to the current market price of silver. This allows the ETF to mirror silver’s performance.
Benefits of Silver ETFs
Since investors do not hold physical silver, there is no risk of loss, damage, or theft. Additionally:
Silver ETFs Could Be Highly Liquid & Flexible:
Investors can buy or sell the ETF units from anywhere through stock exchanges (during market hours).
They can also invest any amount based on their budget.
Comparatively Lower Costs:
There are no storage, making, or insurance charges that usually apply to physical silver.
The only ongoing cost is the fund’s expense ratio, brokerage fees, STT/ Exchange fees and other similar charges
Transparency:
Investors can see the real-time value of their units anytime.
The silver ETF price reflects the domestic market price of silver, subject to tracking errors.
Which Precious Metals ETF Should You Invest In 2025?
Before choosing between gold and silver ETFs, be 100% clear about why you want the metal in your portfolio. Note that gold may be suited for investors who want relative stability + protection during uncertain market periods. Why? That’s because gold usually holds value when:
Currencies weaken or
When equity markets are under pressure.
In contrast, silver is influenced not only by investor demand but also by industrial needs such as electronics, solar panels, and manufacturing. This dual nature makes its price more volatile.
Hence, if your purpose is long-term stability and capital protection, gold may be more appropriate. Whereas, if your purpose is to exploit short-term opportunities or trade based on economic trends, silver may be considered.
Additionally, to pick the right precious metals ETF, you may also read the market environment and check what the economy is signalling.
Okay, but how to do it? Realise that the price of gold and silver does not move randomly! Instead, each metal reacts to very specific “economic signals”. As an investor, when you understand these signals, you can better decide which metal deserves more weight at a given time. Let’s check them out:
| Economic Signal | What This Signal Means | Impact on Gold | Impact on Silver | Which Metal You May Prefer |
| High or Rising Inflation | Prices of goods increase, and the currency loses purchasing power | Gold often strengthens as more investors put their money in gold to maintain their purchasing power | Silver may also increase, but gold could outperform it | Gold |
| Falling “Real” Interest Rates (Interest rates after adjusting for inflation) | Returns on bonds become less attractive | Gold becomes more appealing as an alternative store of value | Silver may benefit, but not as strongly as gold | Gold |
| Central Banks Buying More Gold | Official institutions increase their reserves | Directly supports gold demand and adds long-term strength | Minimal impact since central banks do not buy silver | Gold |
| Currency Weakness (Particularly the domestic currency losing value) | Investors fear loss of purchasing power. | Gold usually gains because it is seen as a currency hedge. | Silver may follow, but it could be with a weaker correlation. | Gold |
| Industrial Expansion | Higher use of metal in production lines. There could be growth in Manufacturing, Electronics, Auto, and Solar Sectors. | Gold has limited industrial demand, so the impact is mild. | Silver demand increases due to heavy industrial use. | Silver |
| Supply Disruptions in Silver Mining | Mining output falls due to strikes, closures, or lower ore grades. | No major impact on gold. | Reduced supply can lead to an increase in silver prices. | Silver |
| Periods of Global Uncertainty | Investors look for safety during geopolitical tensions and recessionary periods. | Gold is often looked upon as a “defensive asset.” | Silver may rise, but it could happen with more volatility. | Gold |
Precious Metals ETF Offered by Tata Mutual Fund™
To let investors gain exposure to domestic prices of gold and silver, Tata Mutual Fund™ offers two types of precious metals ETFs:
- Tata Gold Exchange Traded Fund and
- Tata Silver Exchange Traded Fund
Both schemes are available in the “Direct-Growth” variant. This means you can invest directly with Tata Mutual Fund™ and are not required to pay commission to distributors. Also, these gold and silver ETFs do not pay dividends. All profits are reinvested back into the scheme, and the value of your investment potentially increases through NAV (Net Asset Value) appreciation.
In addition to precious metals ETFs, Tata Mutual Fund™ also offers Tata Gold ETF Fund of Funds and Tata Silver ETF Fund of Funds. These are open-ended schemes, respectively investing in the Tata Gold Exchange Traded Fund and the Tata Silver Exchange Traded Fund.
Let’s gain more clarity about all these investment options below:
| Mutual Fund Scheme | Product Label | Benchmark | Scheme Riskometer | Benchmark Riskometer | Exit Load |
| Tata Gold ETF | An open-ended exchange-traded fund replicating/ tracking the domestic price of Gold. | Domestic Price of Gold | High Risk | High Risk | NIL |
| Tata Silver ETF | An open-ended exchange-traded fund replicating/ tracking the domestic price of Silver. | Domestic Price of Silver | Very High Risk | Very High Risk | NIL |
| Tata Gold ETF Fund of Funds | An open-ended fund of funds scheme investing in the Tata Gold Exchange Traded Fund. | Domestic Price of Gold | High Risk | High Risk | 0.5% when redeemed or switched out on or before expiry of 7 days from the date of allotment. |
| Tata Silver ETF Fund of Funds | An open-ended fund of fund scheme investing in the Tata Silver Exchange Traded Fund. | Domestic Price of Silver | Very High Risk | Very High Risk | 0.5% when redeemed or switched out on or before expiry of 7 days from the date of allotment. |
Risk Level of the Above Precious Metals ETFs
1. Tata Gold Exchange Traded Fund
2. Tata Silver Exchange Traded Fund
3. Tata Gold ETF Fund of Funds
4. Tata Silver ETF Fund of Funds
Disclaimer: Investors are requested to note that they will be bearing the recurring expenses of the fund of funds scheme, in addition to the expenses of the underlying scheme in which the fund of funds scheme makes investments.
Conclusion
So now you know gold and silver ETFs are two distinct financial products that are influenced by different economic signals. The choice between the two entirely depends on your investment purpose and your risk appetite.
Still, to make a better selection, you may consider the following factors:
- Your core objective: Decide whether you want long-term stability or short-term opportunity.
- Your investment horizon: How long do you plan to stay invested?
Current economic signals: Check whether conditions favour the demand for defensive assets or industrial growth.
*Mutual Fund Investments are subject to market risks, please read all scheme related documents carefully.
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