how to invest in gold in India – 5 Best ways to buy Gold

How to invest in gold in India? Buying Physical gold, Gold ETF, Digital Gold, Gold ETF mutual funds, Buy Sovereign gold from Govt of India.

This post was most recently updated on October 29th, 2022

After real estate, Gold is probably the most sought investment option in India. Especially in South India; Gold is considered the safest investment choice!

Although gold prices have fallen quite a bit in 2021; Gold prices have been steadily going up in 2020 so we have seen huge interest from investors to invest in Gold. Considering FD returns are negligible- Investors are looking for an investment option that will fetch them good returns on their investment with less risk. Everyone is looking for an answer to how to invest in gold in India.

How to invest in gold in India / Best ways to buy Gold in India

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:-

  1. Buying Physical gold
  2. Buy Gold ETF
  3. Buy Digital Gold
  4. Buy Gold ETF mutual funds
  5. Buy Sovereign gold bond from Govt of India

We will talk about each investment option in detail in this article and we will go through the pros and cons of each option. 

1. Buying Physical gold

You can buy physical gold from a jewelry shop near you in form of ornaments or Gold bars. When you buy Gold inform of ornaments, most likely you will be paying making charges which most likely is around 10-15% of the Gold value.

how to invest in gold in india
how to invest in gold in India – Physical gold

The pros and Cons of buying Physical Gold are as below:-

Pros – 

  1. You can keep the gold with you all the time.
  2. If the Gold is Jewellery, you can wear it for your use.
  3. You can walk into any shop and buy Gold.

Cons-

  1. Making charges eat up most of the cost of Gold value
  2. When you try to sell the jewelry you may not get the full value of Gold
  3. Risk of Theft

2. Buy Gold ETF

If you are thinking to buy 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.

Gold ETF
Gold ETF

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 NameMarket 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
List of Gold ETFs in India

The pros and Cons of buying Gold ETF are as below:-

Pros:-

  1. Can be purchased and sold like a stock which makes it the most liquidated investment in the gold category.
  2. Track the latest price of gold.
  3. No making charges. The expense ratio of around 1%.
  4. No reason to worry about Theft.

Cons:-

  1. You will not have Gold physically with you as like Jewellery which you can wear anytime.
  2. Temptation to sell the ETF when the Gold prices moves higher

3. Buy Digital Gold

You can buy digital Gold from many websites like Paytm, HDFC Sec Digigold, etc.

What is digital gold?

Digital gold is a virtual method of buying and investing in yellow metal without having to physically hold the gold. You can buy Digital Gold online with just a button click and you have Gold with you. Once you buy them then the Gold is stored securely for you. The company charges money to you to store the Gold safely. You also have the option to get them delivered to your doorstep by paying a fee!

How to buy Digital 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 are as below:-

Pros- 

  1. Hassle-free online purchase.
  2. You can purchase digital gold for as low as Rs 1.
  3. Guarantee of purity.
  4. Buy and sell at any point in time with a few clicks.
  5. No making charges. Buy and sell difference – 2.95% (It covers the cost of physical gold storage, platform maintenance, etc).

Cons-

  1. Not having physical gold with you to wear it for occasions.
  2. You have to pay 3% as GST for purchasing digital gold.
  3. Tempted to sell it if gold prices move higher.
  4. Have to Pay extra fees if willing to take physical delivery.

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 with their return as of 22-05-2020 are:-

Mutual fund nameAsset size1month3months6 months1 year3 years
Nippon India ETF Gold BeES3650.430.0613.8223.5349.1716.73
ICICI Prudential Gold ETF1237.790.0813.5123.1348.8816.34
SBI – ETF Gold1175.120.0713.9423.7149.5116.7
HDFC Gold Exchange Traded Fund1093.070.1214.0223.5848.5916.95
UTI Gold Exchange Traded Fund534.480.0313.8723.4949.0716.86
Axis Gold ETF188.530.0613.5323.1949.2216.85
Aditya Birla Sun Life Gold ETF153.060.5614.5924.3950.3217.01
Quantum Gold Fund88.690.1113.9323.5849.116.68
IDBI Gold Exchange Traded Fund78.670.113.6923.2548.5617.07
Gold ETF mutual funds in India

The pros and Cons of buying a Gold ETF Mutual fund are as below:-

Pros:-

  1. Can be purchased and sold like a stock which makes it the most liquidated investment in the gold category.
  2. Track the latest price of gold.
  3. No making charges. The expense ratio of around 1%.
  4. No reason to worry about Theft.

Cons:-

  1. You will not have Gold physically with you like Jewellery which you can wear anytime.
  2. The temptation to sell the ETF when the Gold prices move higher

5. Buy Sovereign gold bonds from Govt of India

If you are thinking to invest in Gold for the long term then investing in 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 bond from Govt of India online/offline from the below sources:-

  1. Post offices
  2. From public and private banks

The pros and Cons of buying Sovereign gold bond from Govt of India is as below:-

Pros-

  1. This scheme is backed by Govt of India- so this assures the highest level of security
  2. The purity of Gold is guaranteed
  3. RBI will provide you with 2.5% interest yearly on top of a Gold price increase
  4. The minimum investment is 1 gram
  5. Tax-free at maturity. If you buy and sell Gold from other sources after years you will need to pay 20% tax with indexation benefits but Sovereign gold from Govt of India is at maturity!

What is the best way to buy Gold in India?

We hope the above details have given you a detailed view of how to invest in gold in India. In conclusion, here is a comparison between all the investment options we have discussed so far:-

CriteriaPhysical GoldDigital GoldSovereign gold bond from Govt of IndiaGold ETFGold Mutual fund
Investment limitNo LimitMin investment Rs 1Min investment 1 gramMin investment 1 gramMin investment Rs1000
SafetyRisk of TheftSafeSafeSafeSafe
PurityPurity not assuredHighHighHighHigh
ChargesHigh(10-15%)Low – around 4%No chargesExpense ratio approx 1%Expense ratio approx 1-2%
Ease of buy/SellLowAnytimeSpecific dateMarket hoursMarket hours
Purchase PriceVaries between placesFixedFixedVaries between ETFVaries between fund
LiquidityHighHigh5 Year lock inHighHigh
Tax benefitNoNoYesNoNo
InterestNoNo2.5% p.aNoNo
Where to buyShopsOnline portalOnline portalDemat/Trading accountAMCs/MF platforms
How to invest in gold in India

Consider reading – Top 10 Best investment options in India

New to mutual funds – How to select mutual funds India?

  1. What is the best way to invest in gold in India?

    If you are looking to buy gold purely from an investment perspective then the best way to invest in Gold in India is to buy Sovereign gold bonds from Govt of India. These bonds give you an additional 2.5% interest on top of the Gold price which no other instrument gives. It's 100% safe as it's backed by Govt of India.

  2. Is investing in gold a good idea in India?

    Investing in Gold is an excellent idea if you want to hedge your investment against the falling rupee. Gold provides you with safe haven in times of recession when its price shoots up. Every investor should have some of their portfolio allocated to Gold.

  3. 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.

  4. 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.

  5. 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.

  6. 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.

  7. 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.

Closing thoughts on how to invest in gold in India

Looking at the pros and cons investing via Sovereign gold bond scheme seems to be the best way to invest in Gold in India. You can also consider buying Gold ETF/Gold Mutual to invest in Gold.

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