How to Invest in Gold in India – 5 Best Ways to Buy Gold
This post was most recently updated on October 27th, 2023
Gold has been a popular investment option in India for centuries, with its value holding strong even during economic downturns. Investing in gold can be a smart way to diversify your investment portfolio and protect yourself against inflation.
In this article, we’ll take a closer look at how to invest in gold in India, examining different investment options such as Physical Gold, Digital Gold, Gold ETFs, Gold mutual funds, and Sovereign gold bonds.
We’ll provide insights into the benefits and risks associated with each investment option, helping investors make informed investment decisions.
Consider reading: Sovereign Gold Bond Scheme
Page Contents
How to Invest in Gold in India: Best Way to Buy Gold
There are various ways you can invest in gold in India. The top 5 best ways to invest in gold in India / best ways to buy gold in India are as below:
| Criteria | Physical Gold | Digital Gold | Sovereign gold bond from Govt of India | Gold ETF | Gold Mutual fund |
|---|---|---|---|---|---|
| Investment limit | No Limit | Min investment Rs 1 | Min investment of 1 gram | Min investment 1 gram | Min investment Rs1000 |
| Safety | Risk of Theft | Safe | Safe | Safe | Safe |
| Purity | Purity not assured | High | High | Min investment of 1 gram | High |
| Charges | High(10-15%) | Low – around 4% | No charges | Expense ratio approx 1% | Expense ratio approx 1-2% |
| Ease of buy/Sell | Low | Anytime | Specific date | Market hours | Market hours |
| Purchase Price | Varies between places | Fixed | Fixed | Varies between ETF | Varies between fund |
| Liquidity | High | High | 5 Year lock in | High | High |
| Tax benefit | No | No | Yes | No | No |
| Interest | No | No | 2.5% p.a | No | No |
| Where to buy | Shops | Online portal | Online portal | Demat/Trading account | AMCs/MF platforms |
1. Buying Physical Gold
You can buy physical gold from a jewelry shop near you in the form of ornaments or Gold bars. When you buy gold ornaments, you will be paying making charges, which most likely is around 10-15% of the Gold value.
The Pros and Cons of Buying Physical Gold
Here are the pros and cons of buying physical gold:
Pros:
- Tangible asset: Physical gold is a tangible asset that can be used as jewelry or stored for future use.
- No counterparty risk: Unlike other investments, physical gold does not involve a counterparty risk, meaning there is no risk that a third party may default on the investment.
- Inflation hedge: Gold has historically been a reliable hedge against inflation, providing a store of value during economic downturns.
- Easy to sell: Physical gold can be sold easily at any time through jewelry stores or gold dealers.
Cons:
- High-making charges: Physical gold comes with high-making charges, which are the costs associated with manufacturing the jewelry or coins.
- Storage risks: Physical gold must be stored safely to avoid theft or damage, which can incur additional costs.
- Price fluctuations: Physical gold prices can be volatile and subject to global market fluctuations.
- Limited liquidity: Physical gold may not be easily liquidated if you need to sell quickly, as it may take time to find a buyer willing to pay a fair price.
2. Buy Gold ETF
If you are thinking of buying Gold purely from an investment point of view then Gold ETF is one of the best options for you. You can buy Gold ETF just like stocks.
How to Buy Gold ETFs?
To buy Gold ETF you will need a Demat account and a trading account. There are listed Gold ETFs on exchanges and you can buy them just like stocks. A few of the listed ETFs are below:
| Gold ETF Name | Market Cap in Cr |
|---|---|
| *SBI Gold ETF* | 321.5 |
| *Birla Gold ETF* | 98.04 |
| *Invesco G-ETF* | 48.58 |
| *HDFC Gold ETF* | 6.5 |
| *UTI – Gold* | 5.76 |
| *Nippon ETF Gold* | 4.22 |
| *Axis Gold ETF* | 3.16 |
| *IPRU Gold ETF* | 1.97 |
| *Kotak MF-GETF* | 1.66 |
The Pros and Cons of Buying Gold ETF
Here are the pros and cons of buying Gold ETFs:
Pros:
- Low expenses: Gold ETFs generally have lower expenses compared to physical gold, as there are no making charges or storage costs.
- Easy to buy/sell: Gold ETFs can be bought and sold easily through stockbrokers or online trading platforms, providing easy access to gold investments.
- No storage required: As Gold ETFs are held in electronic form, there is no requirement for storage, making it a convenient investment option.
- Diversification: Gold ETFs can provide diversification to an investment portfolio, reducing overall risk and volatility.
Cons:
- Market fluctuations: Gold ETFs are subject to market fluctuations and may not track gold prices exactly, meaning investors may not receive the full benefit of gold price movements.
- Brokerage fees: Investors may have to pay brokerage fees when buying or selling Gold ETFs, which can add to the overall cost of the investment.
- Counterparty risk: Gold ETFs are paper assets, meaning there is a counterparty risk associated with the investment.
- Limited upside potential: Gold ETFs may not provide the same upside potential as physical gold, as they do not offer the same level of scarcity or uniqueness.
3. Buy Digital Gold
Just like buying Jewellery, You can buy Digital Gold online. There are a number of companies like Paytm, PhonePe, etc. that offer Digital Gold on their website. You can buy Digital Gold from most bank websites.
What is Digital Gold?
Digital gold is a new and innovative way to invest in gold without the need for physical ownership or storage. It’s a form of gold investment that allows you to buy and sell gold online, just like any other stock or investment.
Digital gold is backed by actual physical gold stored in secure vaults, ensuring that the investment is always backed by the real thing.
One of the biggest advantages of digital gold is that it’s a convenient and accessible way to invest in gold. You can buy and sell digital gold at any time from the comfort of your own home, without the need to physically visit a gold dealer or jewelry store.
This makes it a great option for those who want to start investing in gold but may not have the time or resources to manage physical ownership and storage.
Digital gold is also a flexible investment option, as you can invest in small amounts and add to your investment over time. It’s also a transparent investment option, as the value of digital gold is linked to the current market price of physical gold.
This means that you can easily track the performance of your investment and make informed investment decisions.
How to Buy Digital Gold Online?
To buy Gold online, You can visit the websites of Paytm, HDFC Sec, etc. They have a dedicated section for you to buy Gold online.
Is it safe to buy Gold online? – Most of the time investors think about whether it is safe to buy Gold online. – The answer is YES! The online buying and selling of Gold are monitored by agencies and the chances of fraud are very very less!
The Pros and Cons of Buying Digital Gold
Here are the pros and cons of buying Digital Gold in India:
Pros:
- Convenience: Digital Gold can be bought and sold online, making it a convenient way to invest in gold without the need for physical ownership or storage.
- Accessibility: Digital Gold can be bought in small amounts, making it accessible to a wider range of investors who may not have the resources to invest in physical gold.
- Transparency: The value of digital gold is linked to the current market price of physical gold, providing transparency and making it easy to track the performance of the investment.
- No storage required: Digital Gold eliminates the need for physical storage, reducing the associated risks and costs of storing physical gold.
- Low entry cost: Digital Gold can be bought for as low as Rs.1, making it an affordable investment option for beginners.
Cons:
- Counterparty risk: Digital Gold is a paper asset, meaning there is a counterparty risk associated with the investment.
- Market fluctuations: Digital Gold is subject to market fluctuations and may not track gold prices exactly, meaning investors may not receive the full benefit of gold price movements.
- Limited upside potential: Digital Gold may not provide the same upside potential as physical gold, as it does not offer the same level of scarcity or uniqueness.
- Additional costs: Investors may have to pay additional fees like GST or charges for buying and selling digital gold, which can add to the overall cost of the investment.
- Limited liquidity: Digital Gold may not be as liquid as physical gold, meaning it may not be as easy to sell quickly at a fair price.
4. Buy Gold ETF Mutual Funds
The Indian Mutual fund market has progressed really well in the past and helped investors to give options to invest in instruments via mutual funds. You can easily buy Gold ETF mutual funds now without worrying about having a Demat account etc.
You can just simply buy a Gold ETF mutual fund with a button click! There are many Gold mutual funds in the market some of the mutual funds are:
| Mutual fund name | Asset size |
|---|---|
| Nippon India ETF Gold BeES | 3650.43 |
| ICICI Prudential Gold ETF | 1237.79 |
| SBI – ETF Gold | 1175.12 |
| HDFC Gold Exchange Traded Fund | 1093.07 |
| UTI Gold Exchange Traded Fund | 534.48 |
| Axis Gold ETF | 188.53 |
| Aditya Birla Sun Life Gold ETF | 153.06 |
| Quantum Gold Fund | 88.69 |
| IDBI Gold Exchange Traded Fund | 78.67 |
The Pros and Cons of Buying a Gold ETF Mutual Fund
Here are the pros and cons of buying a Gold ETF Mutual Fund in India:
Pros:
- Diversification: Gold ETF Mutual Funds invest in a portfolio of gold mining stocks or hold physical gold, providing diversification to an investment portfolio.
- Low expenses: Gold ETF Mutual Funds generally have lower expenses compared to physical gold, as there are no making charges or storage costs.
- Easy to buy/sell: Gold ETF Mutual Funds can be bought and sold easily through stockbrokers or online trading platforms, providing easy access to gold investments.
- Professional management: Gold ETF Mutual Funds are managed by professional fund managers who have expertise in managing gold investments.
- Tax benefits: Gold ETF Mutual Funds attract the same tax benefits as physical gold, making it an attractive investment option for tax-saving purposes.
Cons:
- Market fluctuations: Gold ETF Mutual Funds are subject to market fluctuations and may not track gold prices exactly, meaning investors may not receive the full benefit of gold price movements.
- Management fees: Investors may have to pay management fees for the professional management of the fund, which can add to the overall cost of the investment.
- Counterparty risk: Gold ETF Mutual Funds are paper assets, meaning there is a counterparty risk associated with the investment.
- Limited upside potential: Gold ETF Mutual Funds may not provide the same upside potential as physical gold, as they do not offer the same level of scarcity or uniqueness.
- Currency risk: Gold ETF Mutual Funds may be subject to currency risk, as the value of the investment can be affected by fluctuations in the exchange rate.
Consider reading: Types of Mutual Funds in India
5. Buy Sovereign Gold Bonds from Govt of India
If you are thinking to invest in Gold for the long term then investing in a Sovereign gold bond from RBI (on behalf of Govt of India) is the best option for you. You will not only get the Gold at the best price but Govt will also give you an early interest of 2.5% for your holding!
On top of this, you will get tax benefits when you sell the Sovereign gold from Govt of India on its maturity (this option is not available for any of the above options).
How to Invest in Sovereign Gold from Govt of India?
You can buy Sovereign gold bonds from Govt of India online / offline from the below sources:
- Post offices
- From public and private banks
- Via Demat Account
Consider reading: Sovereign Gold Bond Scheme Returns Calculator
The Pros and Cons of Buying Sovereign Gold Bond from Govt of India
Sure, here are the pros and cons of buying Sovereign Gold Bonds:
Pros:
- Competitive returns: Sovereign Gold Bonds offer competitive returns compared to physical gold, making it an attractive investment option.
- No storage required: Sovereign Gold Bonds eliminate the need for physical storage, reducing the associated risks and costs of storing physical gold.
- Liquidity: Sovereign Gold Bonds can be easily bought and sold through stockbrokers or online trading platforms, providing easy access to gold investments with high liquidity.
- Tax benefits: Sovereign Gold Bonds attract long-term capital gains tax benefits if held for more than three years, making it an attractive investment option for tax-saving purposes.
- Safety: Sovereign Gold Bonds are issued by the Government of India, making them a safe investment option.
Cons:
- Lock-in period: Sovereign Gold Bonds have a minimum lock-in period of five years, making them a less flexible investment option compared to other gold investment options.
Consider reading:Â Top 10 Best investment options in India
Closing Thoughts on How to Invest in Gold in India
As someone who has invested in gold in India, I can attest to the benefits it provides in terms of diversification and wealth preservation.
Whether you opt for physical gold, digital gold, Gold ETF Mutual Funds, or sovereign gold bonds, it’s important to carefully evaluate each investment option and consider how it aligns with your investment goals.
I have found that gold investments offer flexibility, convenience, and tax benefits that make them a wise investment choice for Indian investors.
I encourage anyone interested in investing in gold to take the plunge and start building their wealth with this valuable asset.
Looking for Safe investments? Consider reading: 13 Safe Investments with High Returns in India
FAQs on How to Invest in Gold in India
What is the best way to invest in gold in India?
The best way to invest in gold in India is through Gold Sovereign Bonds issued by the Reserve Bank of India. These bonds offer the benefits of both asset appreciation and annual interest on your investment, making them an ideal choice for digital gold investment.
Is investing in gold a good idea in India?
Yes, gold is a good investment in India. The decline in paper investment often leads to an increase in the price of gold, making it an ideal choice for diversifying your portfolio. Although gold prices can be volatile in the short term, it has historically maintained its value over the long term. Invest in gold to secure your financial future in India.
How do I start investing in gold?
You can easily buy Gold mutual funds online. There are so many online platforms like Paytm Money, Grow, etc which provide free-of-charge investment in Gold mutual funds. Alternatively, you can also buy Gold mutual funds from the respective AMC website.
Is it the right time to invest in gold?
Gold prices tend to go up when there is a recession around the corner. In 2020, when markets all over the world are facing uncertainty, it’s a great time to buy gold. The value of Gold highly depends on the dollar index. The Dollar index is currently at a multi-year high; it is expected that the dollar index will cool off because of recession fears in developed economies which will drive gold prices higher.
What is the cheapest way to buy Gold in India?
Buying Gold mutual funds/ Gold ETFs / Sovereign gold bonds from Govt of India is the cheapest way to buy Gold in India as they don’t involve in making charges etc.
Will the gold rate decrease in the coming days?
As of October 2022, gold prices are expected to go up because of recession fears in developed countries.
Is Bitcoin a replacement for Gold?
There are a lot of talks about Cryptocurrency these days. Many have started talking about BitCoin going to replace as the new currency in the world. Only time will tell what’s going to happen in the future but I think the value of gold is here to stay as it has been for centuries and BitCoin is not going to replace gold.
How to invest in gold for beginners?
Beginners can invest in gold through gold exchange-traded funds (ETFs). These ETFs allow investors to gain exposure to gold without having to physically own it. By investing in ETFs that focus on gold mining companies, beginners can diversify their portfolios and take advantage of the potential growth in the gold industry.
How to invest in gold through banks in India?
To invest in gold through banks in India, there are many reliable options. Most of the banks have approval from the RBI to import and sell gold to customers. Additionally, Indian Banks offer Sovereign Gold Bonds with a guaranteed interest rate of 2.5% per annum. You can easily invest through net banking and your Bank Demat Account, ensuring convenience and security.
