Gold is one of the most favourite yellow metals for Indians. From adorning it on auspicious occasions to buying gold as an investment, gold has a ubiquitous presence in Indian households. Apart from its cultural significance, gold has served as a store of value across civilisations around the world for centuries. The benefits of the yellow metal as an effective inflation hedge are also well-known. Therefore, adding the precious yellow metal to your investment portfolio may be prudent. Today, whether you’re looking to invest in gold or buy it for aesthetic purposes, you can choose from different ways of buying gold to meet your requirements.

• Gold is a good hedge against inflation.
• Buying gold jewellery as an investment is imprudent due to marking charges and impurities.
• Other ways of investing in gold include digital gold, gold ETFs, gold mutual funds, and SGBs.

At present, there are various different ways of buying gold. So, you can pick any of the following instruments if you wish to buy gold or invest in the precious yellow metal:

Jewellery

When it comes to ways of buying gold, most Indians rely on the tried and tested jewellery route. For generations, Indians have invested in gold by buying jewellery. Buying gold jewellery is ideal for cultural and aesthetic reasons. However, if your intention is to invest in gold, this route may not be the best option. For starters, gold is never used in the purest form for jewellery making. Alloyed gold fetches you a lower sell price when you wish to liquidate the investment. Secondly, jewellers charge around 10%-20% making charges on gold jewellery. While these charges constitute a significant portion of the gold jewellery’s final price, they become non-refundable when you proceed to sell the investment.

Gold bars and coins

Purchasing gold bars and coins is a better way to buy gold for investment purposes. Unlike gold jewellery, which is often crafted from 14k, 18k, 22k, or 24k gold, gold coins and bars are typically made using 24k gold. This ensures that they contain minimal alloy content with a gold purity of almost 99.95%. Generally, you can buy gold coins and bars from banks, NBFCs, and even e-commerce sites. Coins are available in various weight configurations starting from 0.5g to 50g options. All gold bars and coins are hallmarked to ensure purity and authenticity for the buyer. Apart from purity, you also get to enjoy freedom from making charges when you choose this way of buying gold.

Sovereign gold bonds

The Indian government launched sovereign gold bonds, or SGBs, back in 2015 as another different way to buy gold. SGBs are issued against grams of gold, allowing investors to buy gold without the hassles of physically holding the asset. The RBI issues SGBs in tranches on behalf of the Indian government. The price of an SGB is linked to the market price of physical gold, and it is calculated by taking the simple averaging closing price of 99.99% purity gold 3 days prior to the bond’s issuance. Each SGB comes with a minimum lock-in period of 5 years, while the total tenure is 8 years. Fresh SGBs are sold twice a year, but you can purchase earlier issues on the secondary market.

Digital gold

Another novel way of buying gold is through the digital route. You can buy digital gold online using various fintech platforms and payment apps. You can purchase digital gold for as little as one rupee, making it an easily accessible option for any investor who wants to invest in the yellow metal. When you purchase digital gold from authorised dealers, you essentially gain ownership of 99.9% 24k pure gold. Most of the platforms selling digital gold have tied up with either MMTC-PAMP or SafeGold to offer the yellow metal in an electronic mode. Digital gold can be redeemed 24x7, and some sellers even allow you to redeem your investment for physical gold jewellery. However, there may be minimum weightage requirements, and you may have to pay certain conversation costs.

Gold ETFs

Gold ETFs are exchange-traded funds that invest in gold. Like all ETFs, gold ETFs are traded on the stock exchange, where they can be sold and purchased. You need to have a Demat and trading account with a stockbroker to purchase, hold, and trade in gold ETFs. In addition to having no entry and exit charges, gold ETFs have a low expense ratio as they are passively managed. All in all, if you are thinking from an investment perspective, this is one of the best ways to buy gold.

Gold mutual funds

Gold mutual funds stand as a popular option among the different ways to buy gold. Gold MFs invest in gold and gold-related assets such as coins and bullion. While a relatively new concept, gold MFs offer several attractive benefits. Therefore, you can invest in gold without the burden of buying physical gold or trading in ETFs on the stock market. However, investing in gold through gold MFs is costlier since they may come with high expense ratios and an exit fee.

In a nutshell, there are several different ways to buy gold in India. While the initial cost of buying physical gold is high, you can instead choose coins and bars. Other options like digital gold, SGBs, gold ETFs, and gold mutual funds stand as cost-effective alternatives to physical gold, which may be difficult to store and can lose value on redemption. For instance, SGBs are prudent if you want to invest in gold for the long term, while gold ETFs offer better liquidity. Therefore, you can consider the different ways to buy gold and proceed accordingly.

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