The optimal method of investing in gold will depend on your unique circumstances and financial objectives.
As we Indians consider gold to be a symbol of prosperity and a safe investment option, I can still remember how my grandparents insisted that my brother and cousins purchase gold when they received their first paycheck. Gold has been a popular investment for centuries and it is still regarded as a safe haven asset in times of economic uncertainty.
While in the past, people generally purchased gold from nearby jewellery shops, these days there are many ways in which you can buy or invest in gold. However, the optimal method of investing in gold will depend on your unique circumstances and financial objectives. That said, let’s see where all we can invest in gold in 2023.
Here are some of the most popular ways to invest in gold:
- Jewellery: The most conventional, but most expensive, way to buy gold is through jewellery. When you purchase jewellery, you pay both the manufacturing charge—the price of minting the item—and the gold itself.
- Gold coins: Although gold coins are a more cost-effective way to purchase gold, they still have a manufacturing fee. The production fee is, however, often less than jewellery.
- Digital Gold: A more recent technique to invest in gold is digital gold. It is a method of acquiring gold ownership without really taking physical control of it. On exchanges, digital gold is exchanged, and the price is frequently quite similar to the spot price of gold. However, before buying digital gold, you should know the risks of doing so.
- Gold ETFs: A sort of mutual fund that invests in gold is a Gold ETF. Because you can purchase and sell them through a brokerage account, they are considered a highly practical method to invest in gold.
- Sovereign Gold Bonds: Bonds issued by the government that are backed by gold are known as sovereign gold bonds. They provide a set interest rate, and at the conclusion of the period, the investor has the opportunity to redeem the bond for the actual gold price at the time.
Read More: Bank FD rates in India 2023: List of banks with revised interest rates
Comparison of Different Gold Investment Options
| Way to invest in gold | Benefits | Risks | Tax implications | Returns in 8 years on Rs 1 lakh investment* |
| Jewellery | A traditional way to invest in gold.Can be a safe and secure way to invest in gold. | Can be expensive, due to making charges. Can be difficult to sell quickly if you need urgent cash. | The price of jewellery is subject to capital gains tax. | Rs. 1,30,000* |
| Gold coins | A more affordable way to invest in gold than jewellery. Typically have lower making charges than jewellery. | Can be volatile, as the price of gold can fluctuate. Can be difficult to sell quickly if you need urgent cash. | The price of gold coins is subject to capital gains tax. | Rs. 1,40,000* |
| Digital gold | A more convenient way to invest in gold than physical gold. Can be traded on exchanges, and the price is typically very close to the spot price of gold. But there are some risks as well. | Can be less secure than physical gold, as it is not held in your possession. The price of digital gold can fluctuate, just like the price of physical gold. | The price of digital gold is subject to capital gains tax. | Rs. 1,40,000* |
| Gold ETFs | A very convenient way to invest in gold, as you can buy and sell them through a brokerage account. Can be a good way to diversify your portfolio. | The price of gold ETFs can fluctuate, just like the price of physical gold. | The price of gold ETFs is subject to capital gains tax. | Rs. 1,40,000* |
| Sovereign gold bonds | Offers a fixed interest rate, and the investor has the option to redeem the bond at the then physical gold price at the end of the term. Can be a good way to invest in gold for the long term. | The price of sovereign gold bonds can fluctuate, just like the price of physical gold. | The interest on SGBs is taxable at the applicable slab rate, but the capital gains on SGBs are tax-free. | Rs. 1,50,000* |
*Approximate figure. Assuming Rs 1 lakh invested, Gold price Increased by 50% over 8 years adjusting with taxes & other charges
Read More: Three board members quit Byju’s, Deloitte steps down as auditor: Report
Investing in gold is a smart way to safeguard your wealth and bring diversity to your investment portfolio. While jewelry may seem expensive due to making charges and capital gains tax, gold coins offer better returns despite the capital gains tax factor. Digital gold may sound appealing, but it also incurs storage costs and capital gains tax. Similarly, Gold ETFs come with similar charges.
However, we have observed that by investing Rs 1 lakh in each gold segment for 8 years, the sovereign gold bond provides higher returns compared to other gold investment options. It guarantees an annual interest rate of 2.5%. Nonetheless, it is crucial to conduct thorough research and comprehend the associated risks before making any investment decisions. You should also consult your financial advisor before making any investment decision.
This article has been written by Nimmagadda Deeraj, an intern with FE PF Desk.
Disclaimer: The above content is for informational purposes only. Please consult your financial advisor before making any investment decision.
