Gold ETF as non-cash component

F&O
1

Hi,

Why is ZERODHAAMC-GOLDCASE and other Gold ETF pledging are considered as non-cash component whereas SGB is considered as cash component.

2

Backed by govt
Hence cash comp ig

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3

By that logic, all PSU stocks should also be considered as cash component.

4

Because they are Gold ETFs which are backed by physical gold, whereas SGBs are classified as bonds as they aren’t backed by physical gold.

I believe, only debt instruments qualify as cash component.

SGBs, though linked to gold, are just bonds. The government just borrows money through SGBs, only that, instead of a predetermined redemption value, the redemption value of SGBs are linked to the gold prices.

So IMO, it is the classification that determines if an instrument is cash collateral or not, in addition to the liquidity of the instrument.

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