Gold investment：How to Invest in Gold and Top Gold Investment Options in India 2022

Gold is one of the oldest investment forms. Of all precious metals, Gold is one of the most popular investments. It is more prevalent in India not only as a precious ornament for women but as an investment which can be sold off when the family is going through turbulent times. India’s interest in gold can be seen that, as of June 2022, India's gold reserve has reached 768.8 Tonnes.  

Interestingly, investment in gold is no longer limited to buying gold jewellery and ornaments. Gold investment has expanded to other forms of investment such as Gold Mutual Funds, Gold Bond Schemes, Gold Exchange-Traded Funds (ETFs), and Digital or E-Gold. These other forms of investment are about owning gold without the burden of storing or carrying them around.

In this article, you will learn the best way to invest in gold in India and the pros, cons, and criteria involved in investing in gold.

Investment in gold in India is not new, and investing in its physical form is the oldest method. Now there are different options to choose from. You can now decide to invest in either the physical or digital form of Gold. Here are the options to invest in gold in India.

Physical Gold

This is simply buying a physical form of gold. You can do this by buying gold jewellery and ornaments. It can also be in the form of gold coins and bullions. Physical gold is the purest form of gold, and after buying it, you use, keep, or store it until you want to sell it.

The gold coins can be in different sizes, from a gram up to 50gramms, and the value depends on the size, weight, and purity. Except for ornamental use, there are almost no reasons to invest in the physical form of gold.

The minimum amount you can invest in physical gold is 6,000 rupees which is equivalent to a gram of gold coin.

Pros

●     There is no investment charge, unlike investing in other forms of gold. But if it is in the form of bullion or jewellery, there might be a making charge.

●     No paperwork needed

●     It is not affected by fluctuations in the stock market. Gold mutual funds can be affected by it.

●     It can be used as an ornament.

  Cons

●     If it is in the form of jewelry or bullion, it can be more expensive because of making charges.

●     It cannot be moved around easily. Other digital forms of gold can be with you without extra load or need for security.

●     There is always a need to keep it safe, which might cause storage and insurance expenses.

●     It is not as easy to sell as other forms of gold. Its selling inconvenience boils down to the impurities. To verify its purity, you might need an origination.

Digital Gold

Digital gold purchase is a form of investment in gold by buying it virtually. It is simply buying physical gold online while the seller safe keeps it in insured vaults. The investor can later decide to get the physical form of the gold. It is similar to buying physical goods online, only that the buyer holds on to them till you are ready to sell or receive them.

The minimum amount you can invest in digital gold is a rupee, the cheapest you can pay to invest in gold.

Pros

●     You do not have to worry about safekeeping. The seller keeps and insures it on your behalf.

●     You can buy it anywhere and at any time.

●     You can liquidity it or exchange it for physical gold whenever you want.

●     You can invest as small as a rupee.

●     The gold is genuine and pure.

●     You can use it as collateral for an online loan.

Cons

●     You cannot invest beyond 200,000 rupees on the digital platform.

●     Making charges still apply. If you request delivery, delivery charges apply.

●     There is a limited storage period most of the time.

●     It is not regulated by a security and exchange board like RBI or SEBI.

Gold ETFs

Gold Exchange Traded Funds are physical golds in the form of units. When you get Gold ETFs, you are buying physical gold, but the only evidence is a paper form or dematerialised form. To invest in gold ETFs, you will need a dematerialised account, and you will get to trade gold on stock exchanges.

Gold ETFs investment is similar to getting digital golds. However, you can decide to get proportionate ownership in a collective vault instead of the physical gold. The currency spent is gold ETF, and a gold ETF is equivalent to a gram of gold. The minimum amount you can invest in gold ETF is 5,000 rupees, equivalent to a gram of gold coin.

MiTrade is a financial trading platform which was awarded the best mobile trading platform, and most innovative brokerage firm twice in a row. To trade and invest in gold in India, Mitrade is the best platform for your transactions.

Pros

●     It can be bought in small quantities and kept for an extended period

●     There is no need to worry about safekeeping the gold

●     It can be exchanged for physical gold later on.

●     It is eligible for long-term capital gains.

●     It is not affected by fluctuations in the stock market.

Cons

●     The brokerage and asset management charges can affect its value compared to physical gold.

●     Sometimes, it might not be a liquidity asset which can affect emergency buying and selling.

Gold Mutual Funds

Gold Mutual funds schemes indirectly allow you to invest in gold. Instead of buying gold physically or virtually, gold mutual funds invest in Gold ETFs and gold mining companies.

The minimum amount you can invest in gold mutual funds is 100 rupees because it is not calculated in units like gold ETF.

Pros

●     You do not need a Demat account to invest

●     There is no need for storing or insuring

●     There is no paperwork involved.

●     Mutual funds are not affected by changes in the gold price.

Cons

●     The funds are affected by fluctuations in stock markets.

●     There is fund management, entry, and exit charge, which will cut the returns despite an increase in the gold price.

Sovereign Gold Bonds

Sovereign Gold Bonds is a gold investment plan initiated by the Reserve Bank of India. It is a regulated form of buying physical, digital or dematerialized gold. In essence, it is trading securities in the form of gold. You can easily purchase it from private or public sector banks.  Even though you get returns in relation to the price of gold, the banks do not have any gold in store. The minimum amount you can invest in gold ETF is 5,000 rupees, equivalent to a gram of gold coin.

Pros

●     It is one of the safest gold investment options.

●     There are no annual expenses like in gold mutual funds or ETFs.

●     There is a bi-annual interest payment, irrespective of fluctuation in the price of gold.

●     No physical gold is involved, so it eliminates storage or payment for storing gold.

●     There are no taxes removed on the interest paid.

●     It can be used as collateral to get loans.

Cons

●     It takes eight years to mature.

●     You can lose your capital if the price of gold reduces

●     It is only available according to the RBI's calendar.

When you are going for gold investment plans, there can be extra costs associated with each, which will depend on the returns of the investment.

Note: The Good and Service tax cost is in relation to the purchase price. Spread is the difference in the cost of buying from the investor and on the digital platform. The digital platforms price the gold with a 6% increase in the investors' prices

There are no extra expenses for the sovereign gold bonds because the banks do not hold any physical gold, and the returns are paid directly to the investors’ accounts. In terms of profit, sovereign gold bonds are the best gold investment plan.

One of the major reasons to invest is to get returns and secure the future. If you are sceptical about investing in gold, here are some benefits of investing in gold in India.

1.   Portfolio Diversification

A good investor diversifies their investment portfolio to reduce the risk of running down when an investment falls through. And while considering other investment schemes to venture into, it is best to consider one that has no relation to the former. Gold is an excellent portfolio diversifier because it has no relation to other investments such as stocks. In reality, the value of gold and other investment options are inversely proportional.

So, if you need a cushion for when the volatile market erupts, it is best to invest in gold.

2.   Hedge against inflation

Inflation affects everyone, no matter how smart you try to play. As an investor who wants to beat inflation, gold is your best bet. Gold retains its value during inflation, and as inflation skyrockets, the value of gold increases and might also skyrocket.

Also, since gold is not produced like a currency, it can’t be affected by currency devaluation. In times of crisis, even the strongest currencies lose value. Gold will always hold or increase in value. 

3.   Perfect Crisis Commodity

Gold is always in demand, and it is a liquid asset which always comes in handy in times of crisis. It is not any different during geopolitical risks, as the value of gold either stays constant or increases during these times.

Also, you need not worry about a shortage in demand for gold. Gold is a natural resource and is limited in supply. So, there will always be a demand for it which means there will always be a rise in the price of gold. Gold returns India is usually high because of the value placed on it especially during celebrations. Every year, you can be sure that there will be a rise in demand for gold in India. In turn, higher value of gold every year.

4.   Easy Possession

Gone are the times when you had to meet someone who had gold to buy the gold, and you had to ensure you were getting the truly valuable one. Now, you can easily invest in gold by choosing from the available gold investment options like gold ETFs, digital gold, Gold bond, etc.

5.   Goods Return

Any investment that can yield good returns despite inflation, or other affecting factors should be considered. Gold investment in India has a high tendency to give good returns, considering that gold always rises despite the economy or inflation

Before deciding on gold as an investment option, here are some factors to consider and actions to carry out.

1.   Research

In any form of investment, research is one of the primary steps. It has been established that gold is a good form of investment especially compared to other investment options. Despite its safety, you still need to research the market to know the best time to invest in gold.

Timing is also crucial when investing in gold to maximize your profit. You can check out more information on financial publications and blogs, analyst research reports, investment news, and industry websites. Ensure these reports are credible, can be relied upon, and use them to your advantage.

2.   Investment plan

For the best investment in gold plan, you have to consider your budget, plan, and time of investment. There are different ways to invest in gold (which have been explained above), but it is not easy to decide on which is the best plan.

If you need the cheapest plan, you can get digital gold, while if you need a long-term and stable form of investment, you go for the sovereign gold bonds. After deciding on the plan you want, you also have to decide on the best platform for the trade.

Also, you can trade gold ETFs using contract for difference (CFD). CFD trading is a type of trading between a CFD broker and an investor, which an investor uses to get into the financial market. It is an alternative to direct trading. CFD is the contract that allows the investor to trade financial products based on the price difference between the contact entry and closing time.

With CFDs, an investor can trade globally, and get a wide range of assets including gold. Trading with CFD presents lower risks than direct trading, and it comes with favorable margin.

To buy gold ETFs with CFD trading, you should trade on the MiTRADE platform. The platform offers CFD trading, fast order execution, to get excellent customer service, competitive transaction fees, investment options virtues, and many more.

If you are buying physical gold, you should ensure you are getting the value of your money.  Gold’s value depends on its purity, and the standard measurement for gold is Karat. The purest form of gold possible is 24 gold which indicates that there are no alloys present in the gold; only 100% gold. If you are buying a jewelry, the gold can’t be 24 karat because 24 karat gold is too soft and will need an ally to make it into a piece of jewelry.  So, ensure you know the purity of the gold you are buying, and you pay accordingly.

3.   Storage

This will only be an issue if you are investing in physical or digital gold. It can be an issue when buying digital gold because some companies have limited storage time. So, if you do not have an adequate or insured storage place for the gold, invest in gold ETFs or other forms of gold.

Remember, if you store it in a locker facility in a bank, you will be charged for it, which is the same as storing it when you buy digital gold.

4.   Resale

One of the primary reasons for investing in gold is its liquidity. If you want to make maximum profit when reselling the gold, you need its purchase receipt and certificate of purity. If you do not have either, the buyer might take advantage of that and offer it at a lower resale value. It is important to note that banks do not buy physical gold bars, coins, or jewellery because of the sovereign gold bonds plan.

When buying gold ETFs, consider going for liquid ones, as they will come in handy when you need a liquid asset. Sovereign gold bonds are liquid, but you can’t sell them until five years after investment.

However, if you need emergency funds, you can get loans with the gold investment as collateral. For sovereign gold bonds, you are allowed to loan 35% of the bonds value while using the bonds as collateral. If you have digital gold or gold ETF, you can use them as collaterals for online loans.

Investing in gold is an excellent investment decision. The major decision lies in choosing a suitable gold investment plan. You can decide on a suitable plan depending on your preference and the factors stated above. However, buying physical or digital gold has high risks and is not advised.

If you can wait long term, investing in sovereign gold bonds is an excellent gold investment plan which yields well after the eight years wait.  But if you want a reliable short-term gold investment, invest in Gold mutual funds or gold ETFs. Trade for gold ETFs on Mitrade.