What are the different ways to invest in gold?

What are the different ways to invest in gold?

There are several ways that you can invest in gold nowadays. Gold is not just wearable but also a financial tool that will help you meet cash requirements during emergencies. It is one of the biggest and most preferred assets for investors and buyers in India. Gold is synonymous with wealth and prosperity as well; you can own gold in numerous ways including physical and paper gold. You can physically purchase gold in the form of coins, jewellery and gold bars while you can also make use of gold ETFs (exchange traded funds) for paper gold along with SGBs (sovereign gold bonds). You can also check out fund of funds (FoFs) which deploy further investments in gold ETFs too. There are also gold mutual funds or fund of funds that make investments in shares of international gold mining entities as well. 

You can always purchase physical gold from your nearest jewellery store or brand. Some jewellery stores have provisions for ordering online as well while there are e-commerce platforms like Paytm, Amazon India, and Snapdeal where customers can purchase gold coins online and get them delivered at home. 

On that note, here’s taking a look at some of the best ways to invest in gold- 

  • Physical Gold- You can buy gold in the form of jewellery although there are concerns regarding safety, storage and higher costs. Making charges usually vary between 6-14% of the gold cost and cannot be recovered down the line. 
  • Gold Coin- You can buy gold coins from jewellery stores, NBFCs, banks and e-commerce platforms. The Government has also launched 5 and 10 gram gold coins with the National Emblem and Ashok Chakra engraved on one side with Mahatma Gandhi engraved on the other side. The Indian Gold Coin and Bar will have 24 Karat purity along with 999 fineness along with anti-counterfeit attributes in tandem with packaging that is tamper-proof. They will have hallmarking as per the standards of BIS. The coins will be distributed through approved MMTC outlets, post offices, and bank branches. 
  • Gold Savings Scheme- Gold savings schemes allow you to invest a fixed amount each month for a specified tenure. When it concludes, you have to purchase gold at a value equivalent to the total deposit made including a bonus figure. This conversion will be done at the price that stands at maturity. Jewellery stores sometimes offer a month’s installment amount as the bonus or any other gift or cash incentive. 
  • Gold ETFs- Gold exchange traded funds (ETFs) are cost-effective and the investments happen on the stock exchange (BSE/NSE) with gold being the basic asset. Pricing is transparent and you will only need a trading account with a stock broker along with a Demat account. You can invest a lump sum amount or buy at periodic intervals via SIPs (systematic investment plans). You can buy as less as 1 gram. You will have to contend with nominal costs including expense ratio, broker charges, and tracking error which may happen. 
  • Sovereign Gold Bonds (SGBs) – These are issued by the Government in specific windows for investors. Previous issues at the market value may be bought at times in the secondary market. This is a great way to invest in paper gold. 
  • Digital Gold– You can buy gold bars, coins and jewelry online across multiple platforms and also Stock Holding Corporation of India along with the likes of Me-Gold by Motilal Oswal. They are provided in collaboration with MMTC-PAMP, the JV between public sector entity MMTC and PAMP SA from Switzerland. 

The initial gold ownership cost (physical) via coins and bars is somewhere around 10% and this may rise even further for actual jewellery. Gold ETFs and SGBs are paper-gold investments and are more affordable. The latter does not have entry costs while the former has entry costs of roughly 1%. SGBs will be highly beneficial for people investing in gold for a longer duration since the maturity comes after 8 years although the lock-in period concludes from the 5th year itself. Yet, gold ETF offers higher liquidity as compared to SGBs. Ownership of units is easier as compared to SGB since this is fully online with regard to ETFs. The risks of holding/ownership are non-existent for both types. 

Gains from SGBs are exempted from taxes at redemption although gold ETF gains are taxable at 20% post indexation after three years. ETF units will not be earning the extra 2.5% interest per annum like SGBs which is the sole disadvantage. Have a maximum of 10% of your portfolio invested in gold as per expert recommendations. Be clear as to why you are investing in gold, i.e. for weddings and inheritances or pure investments. Nowadays, there are multiple avenues for gold investments. Choose wisely, depending upon your specific requirements. 

John Norwood
John Norwood is best known as a technology journalist, currently at Ziddu where he focuses on tech startups, companies, and products.