Investing in Gold in India: A Beginners Guide
Since ancient times gold has been considered a symbol of wealth and power and is one of the most common investment options in India. It is seen as a safe haven asset that can protect your wealth against inflation and economic uncertainty. There are many numerous ways to invest in gold in India - in physical form which is the most widely accepted form in an Indian household and in digital form through ETFs and mutual funds.
| Asset Type | Average Yield in (1year) period |
| Gold | 8% |
| Corporate Bonds (AAA rated) | 8-10% |
| 1 Year Government Bond (as on 21st August 2023) | 7.13% |
| FD | 6-8% |
| Nifty 50 | 10-12% |
How to Invest in Gold in India: Top Gold Investment Options
Physical gold: It is the most traditional form of investing in gold. Physical gold includes gold coins, bars, or any form of jewelry. It is a tangible asset that you can hold and store. However, it can be expensive to buy and store, and it is also vulnerable to theft and damage.
Digital gold: You can buy digital gold through various gold-backed mobile apps like INDmoney. It is more affordable and easier to store and trade. However, being an intangible asset, you cannot have the physical possession of gold.
Gold mutual funds: These are mutual funds that invest in gold and are managed by Asset Management Companies (AMC). Gold MFs offer diversification and professional management. However, they can be expensive, and they may not track the price of gold as precisely as physical gold or digital gold.
Gold exchange-traded fund (ETF): These work similarly to stocks, as they are bought and sold on stock exchanges. These ETFs mainly include actual Gold and shares of companies involved in Gold mining or refining as their main components. It offers liquidity and low fees. However, they may not be as tax-efficient as gold sovereign bonds or gold mutual funds.
Gold sovereign bonds: These are government gold bonds issued by the Reserve Bank of India (RBI). Gold sovereign bonds have a fixed interest rate, and also give you the option to redeem them for physical gold. However, their returns are linked to the price of gold and assured by the Government of India (GOI), these bonds do not actually have real gold as a basis.
SGBs Price History for FY 2022-23
| Series | Month | Price per gram |
| Series 1 | June 2022 | Rs 5041 |
| Series 2 | August 2022 | Rs 5091 |
| Series 3 | December 2022 | Rs 5409 |
| Series 4 | March 2023 | Rs 5611 |
How to Invest in Gold in India: Types, Minimum Amount, Costs and Risks
| Type of Gold | Minimum Investment Amount | Average 1-year Return | Additional Costs | Risks |
| Physical Gold | About Rs 6,000 for a 1-gram of gold | 8% | Making charges for the jewelry (10-12%) + GST (3%) + storage charges (3%) | Theft, Purity Concerns, Manufacturing Losses |
| Digital Gold | It begins at just Rs 1 | 14% | Spread charge (3%) + GST (3%) | Regulatory Oversight Absence |
| Gold Mutual Funds | You can start with as little as Rs 100 | 20% | Annual cost of 0.6% to 1.20%, including 0.5% to 1% in Gold ETFs + 0.1% to 0.2% for handling and managing the Gold | Market Volatility, Gold Price Instability |
| Gold ETFs | Rs 50 to Rs 100 for one unit, depending on the ETF price | 19% | Annual 0.5% to 1% including Expense Ratio, Demat Account Charges, and Brokerage | Market Volatility, Gold Price Fluctuations |
| Gold Sovereign Bonds | Around Rs 5,000 for 1 gram of gold value | 2.5% | No costs | Risk of Default by the Government of India |
How to Invest in Gold in India: Which is right for you?
The best gold investment option depends on your individual circumstances and investment goals. If you are looking for a tangible asset that you can hold and store, then physical gold may be a good option for you.
If you are looking for a more affordable and convenient way to invest in gold, then digital gold or gold ETFs may be a better choice. If you are looking for an investment that offers fixed returns and the option to redeem it for physical gold, then gold sovereign bonds may be a good option for you.
No matter which gold investment option you choose, it is essential to do your research and understand the risks involved. Gold is a volatile asset, and its prices can go up and down. You should only invest in gold if you are comfortable with the risks and you have a long-term investment horizon.
How to Invest in Gold in India: Key Takeaways
- Start small and you don't have to invest a lot of money in gold to get started.
- Diversify your investments. Remember to not put all your eggs in one basket!
- Do your research to learn about different gold investment options and choose the one that is right for you.
- Invest for the long term since gold is a long-term investment. Don't expect to get rich quick by investing in gold.