The entry of Gold Exchange Traded Funds (GETFs) would have surely made George Herbert happy, for he would have found in GETFs, what he described in the 15th century. The merit of this innovative financial instrument isn't just confined to its synonymity with gold itself, but more importantly it comes from the fact that it has turned gold into a tradable security.

When the Finance Minister P Chidambaram announced the need for the instrument in the Indian market, the market players turned jubilant, for India enjoys the distinction of being a major consumer of gold. According to the World Gold Council, the association of world's leading gold producers, Indians hold around a seventh of the total global stocks of gold (15,000 tons) worth Rs. 9,50,000 cr. Indians spend around Rs. 40,000 cr, annually on gold jewelry and investments.

Despite such seemingly impressive numbers, the market for gold in India is unorganized and leaves a lot to be desired. Lack of a transparent market, costs and risks associated with storage have prevented the market potential from translating into a business reality. Concerns of quality and deceit by traders have also been the contributing factors.

Despite gold being the best hedge against inflation and also the asset that is capable of providing diversification of portfolio risk, jewelry remains the most preferred form of holding it, while the investing aspect has always been stymied by the difficulties beset in the unorganized market.

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