How to Invest in Gold in India

· Gold acts as a safe haven investment – Whenever there is economic or political uncertainty, gold investments increase in value. This is because historically gold has been an ideal investment option to preserve and grow wealth during periods of economic uncertainty like political turmoil, wars, etc. This mind set continues to this day which increases the demand for gold investments during periods of uncertainty.

Gold is a hedge against inflation – Inflation causes the value of paper currency to decrease with time but this is not the case with gold. Historically gold prices have kept pace with and even exceeded inflation in the long-term. This is a key reason why investing in gold will ensure that your investment will keep pace with rising inflation and grow your wealth in the long term.   

Investing in Gold the Traditional Way: Jewellery, Coins and Bullion

Traditionally Gold has been bought in India in the physical form. In many cases, this gold has not as an investment per se, but as a part of various ceremonies like marriage or as part of festivities. However, in most cases, gold purchased in the physical form tends to sit in lockers and rarely, if ever treated as an investment.

Physical gold purchases in India other than jewellery is typically restricted to gold coins and bars. The main drawback of purchasing physical gold is with respect to the costs associated with renting lockers for safe-keeping, purity of the metal and liquidity issues when faced with a financial emergency. 

3 Ways to Invest in Gold Online in India: Gold ETFs, Gold Funds and Digital Gold  

These days, if you want to invest in gold in India, you no longer have to restrict yourself to buying gold in physical form. Digital gold investment options are available on a variety of online platforms like stock exchanges, Mutual Fund houses as well as mobile apps like Freecharge and PayTM. Such online gold investments in India can be classified into 3 key categories – Gold Exchange Traded Funds (ETFs), Gold Mutual Funds and Digital Gold. Below are the details of these: 

Once you have purchased digital gold, the seller will send you an invoice of the purchase. The company from which you purchase digital gold keeps the gold in a secure vault.

You may sell or purchase digital gold from the convenience of your own home, and in times of emergencies, you can even convert it into instant cash as per the applicable market rate. However, many companies offering digital gold have a capping of Rs. 2 lakhs per investor PAN. No such cap is applicable if you are purchasing Gold ETFs or Gold Funds. 

Invest in Gold with Government Backing: Sovereign Gold Bonds

Sovereign Gold Bonds are government securities issued on behalf of the Government of India by the Reserve Bank of India (RBI). Sovereign Gold Bonds are sold in denominations of one gram of gold, and their price is based on the market price of gold. The maximum investment currently allowed for individuals is equivalent to 4 kg of Gold.

A sovereign gold bond matures in 8 years and you can receive guaranteed interest at 2.5% per annum on your investment at present. Investing in gold through Sovereign Gold Bonds is simple and can be completed through online banking portal of any major Indian bank or by visiting the bank branch. Alternatively, you can also buy or sell your Sovereign Gold Bonds on stock exchanges in India.