what are the investment options available in gold?

Hi Readers,

Hope our previous article on the overview of gold investment and performance was informative and useful for some of you. If you have not yet had the chance to read the same, you can find it here. This week, we would like to throw light on the various investment options available for you in gold:

Physical Gold – An investment method that is most popular among Indians is direct purchase of gold in the form of jewelry, coins and bars, compared to the other forms of gold investments, investing in physical gold still remains a popular method to invest in gold. You can buy physical gold and sell it when you need the money. But when you buy gold as jewelry, there is a downside of making & wastage charges to it which may vary between 8% - 18%.

Digital gold – This is a new investment option that has been on the rise in recent time due to its easy access. You can  purchase digital gold through the following apps:

Paytm, Phone pe, Google pay, and Amazon pay. For example: Paytm has tied up with Kalyan Jewelers for the delivery of physical gold or jewelry. Digital gold allows you to buy and sell gold at market price anywhere anytime. Each gram bought by an investor is backed by an actual physical gold in the vault by the vendor, which can be easily sold back online at market-linked gold rate. 

Right now, there are three companies offering digital gold—Augmont Gold; MMTC-PAMP India Pvt. Ltd, a joint venture between state-run MMTC Ltd and Swiss firm MKS PAMP; and Digital Gold India Pvt. Ltd with its Safe Gold brand.

Downside: The price of the gold is higher than the MCX gold. It’s because there are three types of charges levied, convenience fee, trustee fees, storage fees additionally 3% GST and there is no regulator to look after this investment and the companies involved.

Gold Fund - Gold funds are a type of mutual funds that directly or indirectly invest in gold reserves. The money you invest in gold fund is used to invest in stocks of gold producing, distributing and gold mining companies. It is a simplest way to invest in gold without having to purchase it in its physical form. This investment reduces the risk of loss due to market fluctuations that accompanies the direct investment in gold. Gold mutual funds are ideal for investors who would like to diversify their portfolio and save them against the potential risk of loss from other investments. There are so many gold funds available right now in the market.

 

GOLD ETF - A Gold ETF is an exchange-traded fund (ETF) that aims to track the domestic physical gold price. They are passive investment instruments that are based on gold prices and invest in gold bullion. Gold ETFs are units representing physical gold which may be in paper or dematerialized form. One Gold ETF unit is equal to 1 gram of gold and is backed by physical gold of very high purity. Gold ETFs offer both the flexibility of stock market investment and the simplicity of gold investments.

Gold ETFs are listed and traded on the National Stock Exchange of India (NSE) and Bombay Stock Exchange Ltd (BSE) like a stock of any listed company. Gold ETFs are traded on the cash segment of BSE & NSE like any other company stock, can be bought and sold continuously at market prices.

In short, buying a Gold ETF would mean, purchasing gold in an electronic form. You can buy and sell gold ETFs just as you would trade in stocks. However, when you redeem Gold ETF, you don’t get the physical gold, but receive the cash equivalent of the quantity of gold. Trading of gold ETFs takes place through a dematerialized account (Demat) and a broker, which makes it an extremely convenient way of investing electronically in gold. Gold ETFs offers a complete transparency of its holdings because of its direct gold pricing. Further, due to its unique structure and creation mechanism, the ETFs can lower your selling expenses as compared to physical gold investments.

Source: https://www.amfiindia.com/


Gold Sovereign bond - Sovereign gold bonds are RBI mandated certificates issued against grams of gold, allowing individuals to invest in gold without the burden of protecting the same. To know more about sovereign gold bonds, please read our earlier article on the same here

Hope this article was helpful to you in understanding the investment opportunities in gold. We will catch up again with our insights on ‘Human Life Value and the science behind it’ which will help you to make progress in your financial goals. You can also let us know the topic that you want us to write about in the comment box below.

 


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