Buying a gold ETF in India offers more choices for Indian investors than their American counter-parts. The great popularity of gold as an investment in India combined with the emerging and growing middle class has caused something of an industry explosion in terms of companies willing to offer a Gold ETF in India. While Americans may have a paltry handful of the Gold ETFs to choose from, Indian investors have gold ETFs to choose from by the dozen!
Any examination of the Gold ETF in India revolves around the development of India's economy and exploding middle class. The combination of US outsoursing in addition to increased investment in education amongst Indian citizens has increased the number of people with disposable income by a tremendous amount. This, combined with India's long historical tradition of the importance of gold as a store of wealth and offering of a dowry as part of a matrimonial arrangement exploded the demand for gold in India. Naturally as time has gone on and new investment products were developed featuring gold it is perfectly understandible why Indians jumped on the gold ETF band-wagon.
Another factor of great concern to Indian citizens is the purchasing power of the rupee. Currency manipulation (and essentially dilution) has long been a tool of governments in the developing world. India sadly is no different from other developing countries with long histories. Elephants are not the only ones with long memories when it comes to purchasing power dilution via currency manipulation. It is not always governmental mis-management which causes currency devaluations, but the massive 58% 1966 devaluation of the rupee (followed by a similar but smaller 19% drop in 1991) definitely left a deep impression on the Indian people (who after all only gained independence from Britian in 1947). The massive rupee shock in 1966 made gold part of the wealth development platform for generations of Indians onward.
As previously mentioned Indian citizens have numerous choices when it comes to gold ETFs. The oldest of these is Gold BeES, followed by funds offered by companies such as UTI, Kotak, Reliance, Quantum and SBI. In all a dozen plus or minus funds are offered by the numerous (and growing) fund companies operating and offering services to Indian investors. According to an unscientific poll, SBI was rated most peferred, but results were pretty well split amongst most of the older companies with a gold ETF in India offering. Performance results (as has been the case with most gold ETFs in 2011) has been excellent - with the vast majority of companies with a gold ETF in India showing returns equivalent to their US counterparts - give or take a percent or two. The market for gold remains uncertain for 2012 but given the continued pressure on the major global economies and currencies it is likely Indian investors will continue their new love affair with the gold ETF in India.