Best ways to Invest in Gold.

Indians love gold. It would be difficult to find a person who has never invested in gold. In deciding whether to invest in Physical Gold or Gold ETFs one need to establish the purpose of buying Gold, are we buying for personal consumption, buying for children’s marriage or for investment?

Now if we are buying for personal consumption then it makes sense to buy physical gold in form of jewellery. Gold bars and coins are also another way of buying physical gold to gift someone or to make jewellery in near future. But if we are buying for investment or for child’s marriage then there is another option, which is gold EFT.

I. Gold ETF

Why to Invest in Gold ETF?

Gold ETF are transparent vehicle and provide an effective and efficient platform for small investors to diversify into GOLD. Gold ETFs have been rising in popularity due to their convenience.

No worry on adulteration or impurities

They are easy to trade, no need to store and no worries of theft.

Held in Electronic Form

Can track your investment values in real time

Extremely Liquid

The expenses incurred in buying and selling Gold ETF are much lower than the cost incurred in buying, selling, storing and insuring physical gold. 

How to Invest in Gold ETF?

To Invest in Gold ETF, all you need to have a demat account, that would suffice to invest in gold ETFs. Once you have got the account ready it’s just a matter of choosing Gold ETF and place the order online from your broker’s trading portal. The orders are routed to the exchange where the purchase order are matched with the sell orders and executed. Gold ETFs are open-ended mutual fund schemes that will invest the money collected from investors in standard gold bullion of 99.5 per cent purity. These funds are of open ended nature that trade on a stock exchange just like the shares of an individual company. So investors can any time buy and sell units of gold ETF. Instead of  Physical Gold, by choosing gold ETFs, accumulation of gold for long term is easy. It is safest way and there is no question of purity.

II. E-Gold

What is E-Gold?

E-gold is held electronically in the demat form and can be freely converted into physical gold. In India, e-gold is offered by the National Spot Exchange Limited (NSEL), which gives investors the option to invest in commodities such as gold, silver and platinum online. Any investor can buy gold in small quantities on the NSEL and sell it after making a profit. He also has the option of taking physical delivery of the metal.

Which one to go for E-Gold or Gold ETF?

Conversion to Physical Gold

E-gold can be converted into physical gold for quantities as small as 8 gm, while gold ETFs offer the option of physical delivery but only for a denomination of over a kilogram. Accumulating such a huge amount of gold is not feasible for small investors. Besides, the delivery centres of the National Spot Exchange are located in 15 cities, while ETFs have only one delivery centre in Mumbai. E-gold can also be directly converted into jewellery through select, reputed jewellers that conform with the purity and transparency guidelines. The investor only has to pay for the making charges. The National Spot Exchange aims to bring all branded jewellers under its umbrella of empanelled jewellers within a year.

Cost of Investment

The biggest advantage that investing in E-gold has over Gold ETF is that it involves no management costs or other recurring expenses. So, the product is a lot more cost-effective for people who have a long investment horizon.

Price

In gold ETFs, investors track NAVs, which keep changing with gold prices. In e-gold, investors directly track the price of gold.

Taxation

Gold ETFs have an edge over e-gold here. For gold ETFs, one year is considered as the long term; it is three years for e-gold. E-gold is treated like physical gold and qualifies for long-term capital gains benefits if held for three years or more. However, gold ETFs qualify for long-term capital gains treatment after being held for just one year.