Indians’ love for Gold is inevitable. Akshaya Tritiya has always been considered as one of the auspicious occasions to buy gold according to Hindu traditions, but when there is inflation in the market and gold prices are soaring, making informed gold investment choices is the need of an hour.
It has been witnessed that investing in physical gold in the form of either gold coins or jewellery has been the most conventional option for consumers.
- The cost such as making charges which can go up to as high as 25% to 30% of the gold price and GST at 3%, are irrecoverable on resale.
- The purity and safety of Gold will depend upon the shop you buy form.
- Over the years Physical Gold has served as a hedge fund against inflation.
- There is always a fear of theft and the risk of loss.
- For physical gold the investor has to buy at least 10grams and pay coin making charges.
Many digital platforms have come up, that allow to invest in gold digitally.
- One can transact any time just by clicking a button and can also convert the digital gold into physical coins or bars.
- In such platforms the fear of getting duked in terms of the authenticity of the gold is minimum.
- It represents certified 24 Karat gold of 99.99% purity.
- If you are running out of money but want to invest on digital gold then there are many portals that let you invest in it only at the cost of one rupee.
- The whole process of buying the digital gold is quite transparent it is well regulated and severely documented process.
- There is no scope for adulteration on landing in a fraud circumstances.
- GST is applicable on digital gold.
Gold Exchange Traded Funds (ETFs) and Sovereign Gold Bond (SGB), are the smart way to invest in Gold. There is no GST on investing in to Gold ETFs and Sovereign Gold Bonds.
- Gold ETFs are listed on the exchanges and invest in physical gold.
- These are essentially gold linked Mutual Funds whose value goes up when the metals value appreciates.
- Each unit of Gold ETF represents 0.01 gram or 1 gram of 24 Karat gold depending on which Gold ETF you buy.
- Gold ETFs provide ample liquidity as they can be sold on exchange anytime.
- Gold ETFs charge an expense ratio that includes charges for storage and handling of gold, as well as the insurance cover to protect the gold kept in vaults against calamities or disasters.
Sovereign Gold Bonds are government securities denominated in grams of gold.
- The Bond is issued by Reserve Bank on behalf of the Government of India.
- The Bonds are issued in denominations of one gram of gold.
- An individual can invest maximum for up to 4 kg of gold through SGBs, in a fiscal year.
- The Bonds bear fixed interest at the rate of 2.50 % per annum, payable semi-annually.
- SGBs assure market price of gold at the time of selling.
- SGBs come with a tenor of 8 years where no Long-Term Capital Gain is paid, if kept for the full tenure.
- It allows early redemption only after the fifth year from the date of issue where one has to pay Long-Term Capital Gains.
- The bond is tradable on exchanges, if held in dematerialized form. But low trade volumes can be a hinderance.
Investors in Digital Gold, Gold ETFs and Sovereign Gold Bonds do not bear any making charges or premium. Also, they don’t have to worry about purity, storage and insurance of gold.
With the Russia Ukraine conflict, Gold has again immerged as the best investment avenues. In times of inflation, one may consider investing in digital or a paper gold as it is considered a safe haven since it holds its value better than currency backed assets which may rise in price but falling in value.
