Gold Investment Options in India

It goes without saying that gold is one of the most popular and important metals in the world. Despite the fact that gold rates fluctuate everyday, the yellow metal hasn’t lost its sheen and has proven to be a great investment. In India, buying gold ornaments is still the most common and popular way of investing in the metal. However, it is not the only way to invest in gold. Over the years, the advancement in the financial landscape has made gold investments far more accessible. Today, investors can diversify their portfolio with gold investment options that they do not need to hold physically. Want to learn what other gold investment options are available for you in India? Read further to know more.

Gold Bars

Gold bars, also referred as gold biscuits, are rectangular pieces of gold. They are available in weights starting from 0.5gms to 1kg. Among people, 5g and 10g gold bars are popular. If you are into physical form of gold then you can buy gold bars from banks or jewellers, which are often available as per the prevailing gold rate in the market. But one must note that, banks sell gold bars but do not buy them back. Gold bars of higher weight are cheaper to buy and the ones with lighter weight are easier to encash on a short notice. Gold bars work best for those who are interested in long-term benefits which can be easily converted into cash. Other benefits of investing in gold are:

  • It involves negligible making charges.
  • Unlike in gold ornaments, it does not require investor to make one big purchase.
  • You can encash or convert gold bars for jewellery any time in future.

Gold Coins/Jewellery

Buying gold coins or jewellery is another way to invest in physical gold. Even though the purity of gold jewellery or coins ranges from 14 karat to 24 karat, always choose the latter if you’re buying it for investment purpose. While jewellery can be bought in any denomination of gold depending on the type and weight, the weight of gold coins range from 0.5g to 100g but people usually buy them at 10g or less. Whenever you decide to purchase gold coins or jewellery, ensure that it is hallmarked with the purity sign thus affirming that you are getting the full worth of your money. You can buy gold coins from jewellers and later exchange them to buy gold jewellery or encash it. Banks also offer gold coins but they may not purchase it back. Other benefits of investing in gold include:

  • It involves negligible making charges.
  • Unlike in gold bonds, it does not require investor to make one big purchase.
  • You can encash them any time in future.

Gold ETFs

Gold ETF is an exchange-traded fund (ETF) that was introduced to track and reflect gold rates. These are basically units that are sold and bought on markets such as NSE (National stock Exchange) and BSE (Bombay Stock Exchange) like a stock of a company. In this, investors trade in gold without owning it physically. Even when redeeming or liquidating the units, all an investor gets is the unit’s equivalent cash. Gold ETFs are not used to diversify your investment portfolio but to also protect your financial interests against market stress. Since gold ETFs can only be traded through a demat account, therefore, it involves minute charges such as expense ratio and demat and broking fee.

Gold Monetisation Scheme

It is a gold savings account with the choice of your bank. Your gold savings account will earn interest for the gold that you deposit on the basis of the gold’s weight and the appreciation of its value. You can deposit your gold in any of the physical form such as jewellery, coins or bars. The minimum deposit required under this scheme is 30g of gold. The applicable interest rate will be at the discretion of the banks. The interest amount earned on the gold deposit will be disbursed at the intervals of 30 to 60 days. You will have to stay invested in this scheme for at least a year. Whether you want to redeem your returns in cash or other way must be specified at the time of enrolment so that things can be arranged accordingly.

For more info on Gold Monetisation Scheme, please click here.

Sovereign Gold Bond

Sovereign Gold Bonds (SGBs) are given out by the Reserve Bank of India (RBI) on behalf of the Indian Government. They are basically government securities given out in the units of grams. Interested investors can get them in a paper or demat form. As far as the bond’s nominal value is concerned, it is based on the average closing price in the week before foregoing the subscription period, published by the India Bullion and Jewellers Association Ltd. Trading in these bonds does not include entry charges or fund management cost. The distributions costs and sales commission paid by the issuing agency gets the reimbursed by the government. These bonds can be used as collateral for loans and can be traded on exchanges if the investor wants to exit early. Another good thing about these bonds is that its term lies between 5 and 7 years where units can be encashed anytime by the investor.

Gold Funds of Funds

Gold Fund of Fund (FoF) are open-ended mutual funds that invests in the units of gold ETFs. Their liquidity is equivalent to that of usual mutual funds. They can be bought and encashed at NAV (Net Asset Value) during any business day. The minimum investment amount required to invest in Gold FoFs can be as low as ₹1000/- where the added investment can be as low as ₹100/-. Investors can also use the SIP (Systematic Investment Planning) method of investment if they cannot shell out lump sum amount to invest in it. One of the best features of gold funds of funds is that it does not require demat or trading accounts to carry out trading in the market. To purchase Gold Fund units, a first-time gold mutual fund investor only needs to complete the KYC documentation, which will require your Aadhaar as well as PAN details. Those who already have completed the KYC process do not need to undergo fresh documentation.