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Exploring Gold Buying Options: 6 Strategies for Gold Investment


Gold Buying & Gold Investment

Gold, often called the “eternal metal,” has captivated humanity’s fascination for millennia. In India, in particular, gold holds immense cultural and financial significance. For many households, it represents a store of wealth, a symbol of prosperity, and a safety net for unforeseen circumstances. Gold buying is common, whether for traditional reasons or as part of a diversified investment portfolio. In today’s dynamic financial landscape, there are two primary avenues for gold acquisition: physical and paper. Within each of these categories, a variety of options are available. This article will explore six ways to buy and invest in gold.

1. Physical Gold

a. Gold Jewelry

Owning gold in the form of jewellery has been a long-standing tradition in India. However, it comes with certain concerns, including security, high costs, and the potential for outdated designs. Making charges, which vary depending on the intricacy of the design, can significantly increase the overall cost.

b. Gold Coins

Gold coins offer a more convenient way to own physical gold. They can be purchased from jewellers, banks, non-banking finance companies, and even e-commerce websites. Typically, these coins and bars are of 24-karat purity and 999 fineness, hallmarked according to BIS standards. To ensure authenticity and protection against counterfeiting, buying gold coins in tamper-proof packaging is advisable. Gold coins are available in various weights, ranging from 0.5 grams to 50 grams.

c. Gold Savings Schemes

In recent years, jewellers have introduced gold savings schemes that allow individuals to deposit a fixed amount each month for a specified duration. At the end of the term, participants can purchase gold from the same jeweller at a value equivalent to the total deposited, often including a bonus amount. This conversion occurs based on the prevailing gold price at maturity, with some jewellers even offering cash incentives or gift items upon completion.

2. Paper Gold

a. Gold Exchange-Traded Funds (ETFs)

Gold ETFs provide a cost-effective way of investing in gold without physical ownership. Transactions occur on stock exchanges like NSE or BSE, with gold as the underlying asset. One of the key advantages of gold ETFs is the transparency in pricing. The purchase price closely mirrors the actual gold price, making it an attractive option for investors.

Individuals require a trading account with a stockbroker and a demat account to invest in gold ETFs. Investors can make lump-sum investments or opt for systematic investment plans (SIP) to buy gold at regular intervals, sometimes as little as 1 gram at a time. While there are no entry or exit charges, investors should be aware of three costs associated with gold ETFs: the expense ratio, broker costs, and the impact on returns due to tracking errors.

3. Sovereign Gold Bonds (SGB)

Sovereign Gold Bonds are government-issued securities that periodically become available for purchase by investors. These windows for fresh sales usually occur twice a year and remain open for about a week. Investors looking to buy SGBs at other times can do so in the secondary market, where earlier issues are listed at market value.

4. Digital Gold

Digital gold has become a convenient way to invest in gold using payment apps like Paytm, PhonePe, and Google Pay. Customers can purchase gold starting from just Re 1. Many payment apps have partnered with trusted entities like MMTC – PAMP or SafeGold to facilitate these transactions.

Choosing the Right Gold Investment Strategy

The choice between physical and paper gold depends on individual preferences, financial goals, and risk tolerance. While cherished for its traditional and sentimental value, physical gold can incur higher initial costs. On the other hand, SGBs and Gold ETFs are more cost-effective, with SGBs offering a longer-term investment option and Gold ETFs providing greater liquidity.

Additionally, it’s essential to consider taxation when making gold investments. Gains from SGBs at maturity are tax-exempt, whereas recent changes in taxation rules apply to mutual funds and ETFs. Investors should remember that gold mutual funds and ETFs typically do not have equity exposures exceeding 35% during the financial year.

Lastly, diversification is key. Financial experts recommend that gold investments not account for more than 10% of an individual’s portfolio. Balancing your portfolio with a mix of asset classes can help mitigate risks and maximize returns.

In conclusion, gold remains a valuable and versatile asset for Indian households and investors. Whether you choose the tangible allure of jewellery, the security of government-backed bonds, or the convenience of paper gold, understanding your options is crucial to making informed decisions in pursuing gold-based wealth preservation and growth.


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