How To Invest In Gold? – Explained

The very first financial investment my family did was in gold. Gold has been the most famous and popular investment category for Indian families and even now it is considered as a great hedge against the stock market, inflation and many other troubles as it moves in the opposite direction of the stock market. For an Indian family gold is more than an investment; it holds a special place in the houses of India as a luxury item.

Various Ways Of Investing In Gold

There are literally many options through which you can invest in gold, the most popular option being gold jewelry. For ages the best option for investing in gold was through the physical gold like gold bars, gold coins and gold jewelry but with technology we can invest in gold ETFs and buy sovereign Gold Bonds and many more so let’s talk about various ways you can invest in gold

Investing In Physical Gold

Physical gold is the traditional way of buying gold. Physical gold needs storage and also carries the risk of theft. Investing in physical gold usually involves jewelry, gold coins and gold bars. Before buying physical gold you should always ensure that these are brought through verified and certified dealers. Physical gold is charged extra as making charge

  • Jewelry

The most popular gold investments in Indian households are gold jewelry. Gold jewelry is one way of investing in wearable gold. Jewelries are an expensive investment which also includes its making charges hence further increasing its buying price significantly.

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Jewelries often are emotionally attached to us and are considered a great asset as they could be sold when in need. Jewelries can be purchased through any jewelry shop and are designed to flaunt.

  • Solid Gold (Biscuits/ Coins/ Bars)

These are the purest forms of gold which one can buy physically. They come with low making charges and can give great returns when resold. The coins usually weigh around 1-2 ounces and the bars can be somewhere around 10 ounce. These gold bars and coins are commonly locked away in lockers and safes.

Investing In Digital Gold

Digital gold is a new concept of investing in gold and many fintech platforms like paytm and others offer to buy gold coins. These digital golds are backed up by actual physical gold as these platforms have a tie up with manufacturers. For buying digital gold you must require a demat account, and research about what you are buying.

When you buy digital gold you have options through which you can either sell those digital gold at the market price or you can avail physical delivery of that gold for that value. These are some popular ways of buying digital gold.

  • Sovereign Gold Bond

SGBs or Sovereign Gold Bonds were introduced by the government and is regulated by RBI, they were introduced as an alternative option for owning solid gold

They usually come with a lock in period of 5 years to 8 years and there are no management fees charged for it, though they are backed by physical gold SGB can only be redeemed in cash.

  • Gold ETFs

Gold ETF are Exchange Traded Funds which invest in gold. These are traded in the stock market and when bought they are received on your demat account. These gold ETFs can be bought just like stocks, like stocks these ETFs usually have brokerage charges. In ETFs you are not really buying gold, but these are backed by companies mining golds or vaults with gold deposits.

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Why Invest In Gold?

Gold is a highly unique asset; very liquid, yet scarce. It is considered a luxury good as much as an investment.

Gold is no one’s liability and carries no counterparty risks and hence must be a part of your portfolio, it acts like a hedge against inflation and moves in the opposite direction of the market which mitigates the risk of your portfolio.

There are few things about gold that you must know

  • There are many factors driving gold’s price not just its demand
  • It provides competitive returns when compared to other assets

But how much should you invest in gold? Your portfolio should be allocated around 2% – 10% to improve your financial returns.

Advantages & Disadvantages Of Buying Gold


  • Gold provides a great hedge against the equity market and inflation.
  • There is always a security of value as we know that the price of gold is always increasing.
  • Investing in gold is a good way to diversify your portfolio.


  • When you buy physical gold there is always a storage problem as you have to keep them safe .
  • It is not a passive income asset as it produces you no income when you own it.
  • If you own gold then you have to pay premiums and additional taxes on it.
  • It gives very low returns compared to its competing financial instruments.

End note

Gold is considered as one of the most precious metals and Before the stock market people used to invest in gold and it has been giving substantial gains over the long term, even after the boom in the stock market, gold has been a great hedge against it. Like all investments gold also has its own disadvantages but gold can give us a safe haven for investing.

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It is a great idea to invest in gold whether it be physical gold or digital gold and it is a good idea to include gold anywhere around 2% – 10% of your portfolio. Keep in mind that the price change of gold is not solely related to its demand, there are many reasons behind it.

Roonak Khandelwal
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