Best Gold Investment Options in India

Physical Gold vs Digital Gold vs Gold MF vs Gold ETF vs Sovereign Gold Bond (SGB)

Do you Know that - “Gold is considered as God’s Own Money”.

But why so ?

Simple, because it carries Intrinsic Value, a measure of what an asset is worth.

If you are planning to investment in Gold in India then you have five options available,

1. Physical Gold

2. Digital Gold

3. Gold Mutual Fund

4. Gold ETF

5. Sovereign Gold Bond (SGB)

Let’s discuss each options,

• Physical Gold

  This is traditional way of buying gold from Local Shops in terms of Gold Ornaments, Jewellery, Bullions, Gold coins or bars. Mostly used as personal consumption and less for Investment view but form part of Safety Investment options.

Do you know - Indian households sit on the world's biggest private stock of gold at 25,000 tonnes, which is worth around Rs 110 lakh crore.¹

• Digital Gold

  This is new and innovative way to buy gold in Digital Form mostly in Payment wallets like Paytm, Phonepay, Kuvera, etc. by private players.

Do you know - In India GST rates on Digital Gold is 3% ²

• Gold ETF

  These are passive way of investing in gold through Stock Market. It is good for Long term provided tracking error is less.

Do you know - In India we have only 9 Gold Etf listed in stock exchange as compare to 40+ in USA and 30+ in China.³

• Gold Mutual Fund

  It is indirect way to invest in Gold through Mutual Fund scheme were returns changes due to Management fees.

Do you know - Management fees are high as 5% in some MF which is less in some Active Funds Averages of Asset management houses.⁴

• Sovereign Gold Bond (SGB)

  SGB is Debt Instrument issued by Central Government paying interest at rate of 2.5%⁵ (current rate available) backed by actual gold reserve for period of 8 years maturity.

Do you know - If you subscribed at initial period then you will gat Rs. 50 discount from Government which is 1% of issue price.

Let’s discuss each options on different criteria,

1. Systematic Investment Plan (SIP)

   SIP is basic strategy of pyramiding for low cost long term approach in any asset class. SIP option available in Gold ETF, Gold MF and Digital Gold only.

2. Liquidity

   Liquidity is availability of redemption of investment in emergency or objective of investment fulfillment whichever is earlier paper in investment journey. In Physical gold liquidity is Moderate but in all case Liquidity is comparatively High.

3. Minimum Investment

   Minimum investment in Physical or Digital gold is 0.1 g whereas SGB it is 1 g. But in case of Gold MF or Gold ETF it is depend on scheme which is normally Rs. 100 or Rs. 500.

4. Delivery of Gold

   Only in case of Physical Gold delivery is made as other taxes are generally for digital on in contractual terms.

5. Tax Benefits

   Tax benefits are available for Gold Etf (3 years), Gold MF (3 years) and SGB (5 years) only for Long Term redemption.

6. Additional Tax Rates

   Additional tax rates are applicable for Physical Gold as 3% to 5%, for Digital gold as 3%, Gold MF as 1% Entry load and Gold Etf as 1% Entry Load. SGB is best here with no Additional rates by what so ever.

7. Discount

   Only in case of SGB Central Government provide discount of Rs. 50 per g⁶, objective being more retail participation.

8. Vendors or Source

   For Physical Gold from local vendors, for digital or MF or ETF all Payment Gateway apps like Grow, Paytm, et and for SGB Major Broking houses like Zerodha, Upstock, etc.

Bottom line

• Gold Investment is Long Term Option for Stable gains.

• SGB is the best in terms of cost, tax benefits and safety.

What’s your thoughts ?

1. Based on recent data of IMF.

2. As per latest GST Council Guidelines.

3. As per World Bank Report H1 2020.

4. According to Mutual Funds Sahi Hai website

5. 2.5% rate as per latest Government issued SGB.

6. As per Zerodha notification