Three ways to invest in gold

Gold has always been a coveted asset in India. Along with the financial value of gold, it also has a unique emotional and social value, which pertains to owning physical gold in the form of jewellery, coins or bars.

However, for investment purposes one can invest in gold in different ways listed below:

Physical gold
One can invest in physical gold by purchasing gold coins or gold bars from jewellers, banks or online stores (issued by MMTC), NBFCs etc. Gold coins are usually of standard denomination like 5 and 10 gm, while bars are of 20 gm. These have a 24 karat purity and carry a hallmark of purity in compliance with BIS standards. This is a traditional approach to investing in gold. Investors usually buy gold on auspicious days of the year thereby collecting gold periodically over time. This link provides information about purchase of gold coins:

Sovereign Gold Bonds (SGB)
The government of India issues SGBs at different points in time. Whenever the issue is made, investors can subscribe to SGBs. Investors can invest in denominations of 1 gm and are allotted gold bond certificates on allotment. At the time of redemption, they receive the value of gold at the rate of simple average closing price for the past three business days. The investors receive a fixed predetermined rate of interest during the term of the bond. Whenever an SGB issue is opened, investors can apply for it at bank branches, post offices, SCHIL or authorised stock exchanges directly or through their agents.

Gold ETFs

Another way to invest in gold is through gold Exchange Traded Funds (ETFs). Units of gold ETFs are listed on the stock exchange and one can buy units from there. These are valued in line with the price of gold. Investors need to have a demat account and a trading account to be able to invest in gold ETFs.

Point to note

  • Owning physical gold coins involves making charges.
  • Experienced investors can also look at investing in gold through the commodity exchange using gold futures and options.

(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)

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