In the past, there was only one way to obtain gold: physically, whether in the form of jewelry, gold bricks, or coins. However, as time goes on, it is preferable to realize that there are various ways to invest in gold and other options than purchasing jewelry.
Experts advise investors to place a portion of their portfolio in gold to diversify their risk. When other asset classes have suffered losses, the yellow metal helps stabilize a portfolio.
Let’s examine different methods for gold investment by investors:
Gold is frequently purchased in its physical form, primarily as jewelry, which is not considered a wise choice given the expense and value associated with its creation. Purchasing jewelry made of yellow metal tends to have more sentimental significance than financial value.
Physical gold also includes coins and bars in addition to jewelry. Numerous NBFs, banks, and jewelers have gold coin schemes. In contrast to gold bars, which have a 20-gram denomination, gold coins are typically purchased in 5 or 10 grams. All forms of actual gold are hallmarked and tamper-evident.
Gold Exchange Traded Funds (ETFs)
In essence, gold ETFs allow investors to possess a set amount of the metal without the hassle of keeping it themselves. Owning gold in physical form carries no risk because Gold ETFs are held on paper.
A Demat account and a broker are required for buying and selling Gold ETFs on the stock exchange. One gram unit is the minimum quantity you need to begin investing. If a trader wants to borrow money against gold ETFs, they can be used as collateral.
Sovereign Gold Bonds
India’s Reserve Bank issues sovereign gold bonds. A single investor may purchase up to 4 kg of them. They are distributed in multiples of 1gm. As an alternative to actual gold, they are regarded as government securities.
Investors may only redeem Sovereign Gold Bonds in the latter three years of their eight-year term. The interest rate on the first investment in the bonds is 2.5%. When the subscription period is over, the investors can trade bonds on stock exchanges.
India’s Metals & Minerals Trading Corporation (MMTC) and Switzerland’s PAMP jointly produce Digital Gold. With the aid of digital wallet services, purchasing digital gold is simple via mobile device.
The investor can request delivery at any time throughout the five-year holding period for the purchased gold, which is kept safely by MMTC-PAMP. Both coins and bars of gold can be bought. International market prices have an impact on gold’s price.
Although there are various ways to invest in gold, as was already said, there are hazards associated with producing and storing real gold. On the other hand, Sovereign gold bonds have several advantages. They are safe because they are provided by the Reserve Bank of India and pay interest on the investment.
The price an investor receives at the time of redemption for a Gold ETF is similar to that of the market, and investors also do not need to worry about adulteration because of this.
Therefore, conduct extensive studies to achieve financial security before deciding the type of gold you want.