Gold prices in India are showing a rise. The day of Akshaya Tritiya is considered auspicious for any new beginning from shopping to marriage. It is celebrated as the day when people buy gold. So, let’s take a look at the options for buying gold in India this Akshaya Tritiya.
physical gold
physical Sleep The most popular way to own gold, either in the form of jewelery or gold coins,
sovereign gold bond
Sovereign Gold Bonds (SGB) are the right option to invest in physical gold. With these bonds, you can enjoy capital growth and also earn interest every year. Issued by the Government of India, these bonds also eliminate many of the risks associated with physical gold.
gold etf
Gold Exchange Traded Funds (ETFs) invest in gold of 99.50 per cent purity. Gold ETFs are linked to the price of gold. Each unit of a Gold ETF is pegged to a fixed value of gold.
A large number of people are also buying Sovereign Gold Bonds and Gold ETFs, which are available in paper form.
Gold Mutual Fund
Gold Mutual Fund There are commodity mutual funds that invest directly or indirectly in gold. Investors can invest in gold through Exchange Traded Funds (ETFs).
Investing in Gold ETFs Vs Gold Futures
TradeSmart President Vijay Singhania explains the difference between Gold ETFs and Gold Futures
- In Gold ETFs, investors get an opportunity to invest in gold back assets. However, investors have to pay management fee, demat fee and transaction fee for both buying and selling. Long-term investors may also have to bear a higher tax burden. On the other hand, there is no management fee in case of gold futures. However, brokerage and fees have to be paid for extension of contracts. The tax structure in futures is quite complex.
- For those starting their gold investing journey, Gold ETFs are the ideal instrument as it is less risky and highly liquid. Those who understand the nuances of the gold market can opt for gold futures as the returns are higher than the risk.
- In the case of gold futures, the investor gets an opportunity to avail. That is, even a short-of-cash investor can pay a small percentage of the contract amount and place a bet. However, in case of gold ETFs, the investor has to pay the full amount for the number of units he is buying.
- Gold futures tend to be more volatile, thus ending up with higher returns and higher losses. Rollover feature increases volatility. Compared to futures, gold ETFs are less volatile and the returns are much higher.”
Meanwhile, India’s demand for the yellow metal declined by 18 per cent to 135.5 tonnes in the January-March quarter, according to the World Gold Council (WGC).
According to the report, gold demand declined by 26 per cent to 94.2 tonnes on a year-on-year (YoY) basis.