6 Best ways of gold investment in 2018

POSTED BY manish ON June 21, 2012 COMMENTS (102)

Gold recently crossed its Rs.31,000 per 10 gm mark. This is a historic moment and I am sure a lot of people want to get into gold investment for their own set of reasons. But how to invest in gold?

There are so many ways of gold investment these days; most of the people are stuck with so much of choices. More than the price, the bigger deterrent the confusion of “best option of gold investment”.

In this article we will see how to invest in gold in different ways and what are the pros and cons of all the options. The main focus of this article is to make the options more clear to you and help you take decisions.

How to invest in gold

6 ways to invest in gold

Earlier investing in gold was related to buying ornament, but now, the advance technologies and developments in the field of finance and investment have extended these limits, because of which we have lot of options for gold investment.

Let’s see some of the ways of gold investment.

1. Physical gold

The oldest and most widely used way of gold investment is in the form of physical gold. I would say this is form with which most of the people are comfortable with. From centuries, physical gold is the only way of gold investment.

Now coming to the point, there are two ways to invest in physical gold.

a) Jewelry

This is the most famous way of investing in physical gold. This is mostly done for consumption rather than “investment”. Obviously jewelry is also an investment product in itself, but most of the people buy it for consumption purpose.

The best part of Jewelry is that it’s very easy to invest in it, all you need to do is cash or cheque and that’s all, you can buy it. Also the whole family is more comfortable with this option. However the sad part is that you do not just pay the market price of gold, but also making charges for jewelry.

As it’s in physical form, there are chances of theft also. One more problem with jewelry is that there are chances of fraud at times; you can be sold an inferior quality of gold in the name of “high quality” gold. So it’s very important from where you buy it.

When should you buy?

Its advisable that if there is some marriage going to be there in your house in near future, you can invest in physical gold . Also note that you are very clear that it will not be required for emergency in short term.

It might also be a possibility that you are more attached to physical things and do not believe in online option, that’s another reason you can go for it.

b) Gold Bar/Coin

The Gold Bar and Coins are another good way to invest in physical form of gold. Gold bar/coins are sold by all the banks and jewelers. It’s a good way to invest in gold if you want to do it for pure investment purpose or for some distant future marriage like your sister or daughter marriage.

The good point about bars/coins is that depending on the requirement you can either buy more (bars) or less (coins) and easily available at Banks and jewelry shops, but banks only sell it, do not buy it back. Also generally there is no consumption done on regular basis so a person can keep it in locker or some safe place for long time.

The bad part of gold bar/coins are that its always available at a premium price of 5-10% and at the time of selling them , you again will get a discounted price of 5-10% , so overall your returns will go down .

When should you buy?

You can buy a gold bar/coin if you are too attached to physical gold and cannot go for online option. You can buy it for investment purpose also, but note that returns would be compromised because of the discounted price you get at the time of selling and at the time of buying.

In case you have some marriage at home in coming future (not very near), then also you can buy it.

2. Gold ETF

Gold ETF’s are just like stocks; you can invest in these if you have a Demat account. An ETF an online version of physical gold. The best of gold etf is that its convenient to invest in Gold ETF if you already have a demat account and can start with a small amount (1 gm value) and as and when you want you can invest from time to time.

However the sad part is that you have to pay the brokerage and you do not get a feel of gold in your hands which you get with physical gold. The gold ETF can also be illiquid at times if you have not chosen the right one.

Also there are high chances that you will sell your gold ETF in the time of small emergencies which you will not do with physical gold. Gold Bees from Benchmark and Kotak Gold ETF are one of the biggest gold ETF’s in India right now and they are highly liquid.

We recommend Gold ETF’s to our Financial Planning clients as their expectation is liquidity + some exposure to gold for investment point.

When should you buy?

You should buy gold ETF if you already have a demat account and would like to invest from pure investment perspective, you can consider them as liquid as you can sell them on any day in the stock market.

Click here to read the difference between gold ETF and gold savings fund.

3. Gold Fund of Funds

Gold Mutual funds are those mutual funds which invest in another parent mutual fund which finally invests in stocks of gold mining companies and companies which are related to gold related activities. They also buy physical gold, but in very small quantities.

This is not the suitable investment for those who want to track gold prices, because these funds do not invest most of their money in gold, but gold related companies. So it’s mainly an equity fund which invests in companies.

For example: AIG World Gold Fund , which does nothing but invests in its parent mutual fund AIG PB Equity Fund Gold, which finally invests in different companies .

The good part of these funds is that if you are optimistic about the future of those companies involved in gold, these are good funds , but the sad part is that you will pay expense ratio two times because it is fund of funds. A lot of people invest in these funds by mistake thinking that they invest in real gold.

When should you buy?

By now you will be very clear that these are actually like a sectoral fund which invests in only those companies which have their work in gold related things like mining gold etc. So it’s extremely risky or rewarding.

So if your criteria is to invest in gold companies and not gold, these are the funds to invest in

4. Gold Saving Funds

These are the mutual funds which invest in real gold. They pool in money from people and buy gold and you can buy the units of these mutual funds. The best part of these funds is that you can systematically invest in gold per month through SIP route.

The best part of this is that you don’t need to have a Demat account to invest in gold saving funds. You also can invest regularly in gold through SIP through these funds. But the sad part is that you pay administrative charges and expense ratio just like any other mutual funds.

When should you buy?

This is really a great way to invest in Gold if you do not have a demat account and would like to regularly invest on monthly basis. This is highly liquid option also because you can anytime sell the gold fund units like any other mutual funds unit.

5. E-Gold

E-Gold was launched some time back in India from the exchange called NSEL, which also has other commodities like Silver and Platinum in e-format. It’s very much like Gold ETF, where you can invest in Gold in online format.

For investing in E-Gold you still need a demat account, but with one of the companies authorized by NSEL (list here). The best part of this option is that you can also take physical delivery of gold with some terms and conditions.

But the sad part is that not all big broking houses demat account can be used to buy this, you need to open another demat account for this and this option is not too much popular with retail investors.

When should you buy it?

You can buy this if you need physical delivery of gold at some future point of view , but you also want to benefit from the online advantages like the market price and no storage cost at your side.

Read more about this in detail here

6. Gold Futures

One more option to invest Gold is through Gold Futures, but I would like to call it more of a trading activity and not “investment” because its short term in nature. You can use Gold Future to protect the pricing.

If the price of gold today is Rs.30,000 and a 3 month gold future price is 30,500, then you can lock the price at this moment to 30,500, so that when you want to buy the gold after 3 months, you get it at 30,500 only. This would require a little bit of knowledge on how future’s work.

When should you buy?

This option is bit more technical and one should only use it if you have decent amount of knowledge. Do this if you want to lock the price of gold which you want to buy in future, if you fear that prices can go very high.

Which option are you going to choose and why? Are you now clear on how to invest in gold as per your condition? Leave your answer in the comment section.

Why Should you invest in gold?

Gold investment is one of the traditional ways of investment, that we are observing since childhood. It is one of the most trusted investment tool. Let,s see some of the benefits of gold investment, because of which lot of investors prefer to invest there money in gold.

4 reasons to invest in GOLD

There are many reasons why we shall look beyond conventional Fixed Deposits , PPF and high growth Shares and Mutual Funds. Gold is always seen as a thing to own and only for consuming as ornaments , for jewellery but seldom as an investment purpose , in fact silver also for that matter.

But now there are many reasons to invest in GOLD , just like people invest in Shares , Mutual funds , PPF , NSC and Fixed Deposits.

Reason 1: Stock Markets are becoming risky and uncertain

Stock Markets are in Bad shape for atleast short or medium term atleast. No one knows whats going to happen in 6 months or 1 year or 2 year. Long term may be good but still medium term perspective is not very clear.

Not only Stock Market , but whole of financial Markets are uncertain , if you consider problems like Inflation , dip in projected GDP growth of economy etc .

Reason 2 : It acts like hedge towards Inflation and Foreign currency

As Indian currency is gaining against Dollar and other currencies , Rupees is set to become more strong in coming years. Gold has inverse relation with Dollar.

https://news.goldseek.com/SpeculativeInvestor/1171382460.php

In future as Dollar weakens , GOLD will become more strong.

Reason 3 : Its a relatively less known investment option and has high potential in future

Looking at history , and every time we see that a investment option starts becoming popular and by the time most people know about it , it already gives most of its returns and becomes a talk of past.

GOLD has started gaining attention as investment option and becoming popular and still in its middle stage , if not early.

So its the time to ride the boat.

Reason 4 : Future High Demand and less supply

In future gold is going to in high demand and its already in less supply , so according to the demand-supply logic the prices are bound to go up in near future. Indians account for 23% of world’s total annual consumption and overall global demand has increased 15% Year on year

Gold demands were on all time high in 2007 and expected to increase in coming years due to mismatch in demand and supply.

Reason 5 : More Diversification 

Before some time back , diversification of portfolio was limited to Equity , Debt and Real Estate and some cash , so that your risk is spread across different class of assets. GOLD has evolved as another asset class and not it help in diversifying your portfolio.

I hope this information will help you to choose the better option of gold investment. If you still have any doubt, you can leave your query in the comment section.

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102 replies on this article “6 Best ways of gold investment in 2018”

  1. Sumit says:

    Very helpful tips and definitely one worth sharing. I would like to mention one more article related to gold investment tips- http://www.majorgainz.com/Resources/knowledgecentre/Articles/ViewArticle.aspx?ARID=8e7ea76e-d8c6-46e3-89d4-ad8240ea2067&Section=All&Text=

    1. Thanks for sharing that Sumit

  2. MOHIT says:

    Hi,
    I want to invest in physical gold on every month basis and I can invest every month Rs.2000-2500. So please suggest me, what can I do and from where I can purchase gold with 999.0% purity.
    Regards,
    Mohit

    1. Hi Mohit

      You can purchase it from jewellers only . There is something call Vedni (in maharasthra) which is just raw gold ..

  3. Prafull says:

    Hi Manish,
    Thanks for all the excellent work you are putting up.
    I wanted to know about such a gold investment in which I am free of wealth tax and most importantly in which I can get income tax benefits, say, that I can get redemption in income tax?? Can u give me such a link in which, how that investment works, is explained.

    1. there is no such gold related investments

  4. BV Anil says:

    I’m a govt employee and I get subscribe around 1lac every year in PF which has an interst of around 8%.
    I’m planning to invest a lumpsome amount of around 1lac in gold fund and also.. start any monthly investiment plan in gold.I dont have a demat.
    I heard bullionindia.in and Reliance gold plan are newly introduced.
    I dont need physical gold but am looking for good returns.

  5. BV Anil says:

    Hi Mr. Manish,
    I earn around 4lac/annum. I PF subscribtion is around 1lakh per annum at an interest of 8%.
    Honeslty, Im looking forward for an entity which gives good returns.
    So do you think gold fund is a good option for me?
    Could you please let me know if Reliance gold plan is good or if bullionindia.in or could you please tell me … which is the best wherein I can get the amount in liquid form when ever I need?
    I dont have a demat account. And moreover I’d like to go for a one time investiment plan or almost 1 lakh for one year- two years.

  6. Anurag says:

    Hi Manish ,

    I need physical gold after 4-5 years .What option should I choose to average the Gold prices in a systematic way .Should it be gold etf or e-gold ?

    1. Truely speaking , you can go for anything, does not matter much at the end of the day , but if you already have a demat account, you can go for gold ETF

  7. Mandeep says:

    Hi Munish, Plz tell me about GOLD GINNI.

    can we buy GINNI in physical form, may be it is best than jewellery.

    Regards,

    Mandeep

    1. yes, you can buy it , what exacty you want to know on that ?

      1. Mandeep says:

        Hi

        may be i heard about GINNI that its price is as per market rate, like when we sell gold jewellery the amount deducted from 5-10% or more may be, but in GINNI case, which is current price, we can sell the same on that price is this correct?

        may be you can understand, what i want to know.

        regards,

        mandeep

        1. I have no idea on this GINNI thing !

  8. Mandeep says:

    Hi Munish,
    I read the Article, there are many options to invest in GOLD. As per my requirements, i am investing in Reliance Gold Saving Fund (G), which i think, is best for me and it is also giving me a good return.

    As per my views, SIP option is best,

    Regards,

    Mandeep

    1. Thanks for your views !

  9. Swagata Guha says:

    Hi Manish,
    I invest in gold through benchmark gold etf. I m very fond of investing in silver too. But not in physical form. I came acroos an article in business standard on investing online in gold and silver at wholesale price through bullion India platform (article was given on 22nd October)
    http://www.business-standard.com/india/news/now-invest-online-in-gold-silver-at-wholesale-prices/192427/on
    Bullion India provides the convenience of buying as low as 0.1 gm of gold and 1 gm of silver at live wholesale prices. Along with the price benefit Bullion India avails facilities like no storage fee, free insurance, no account opening charges and no brokerage. These fully insured bars are home delivered at a nominal cost.

    Is investing in this way safe and reliable??? Can you guide me regarding this article? Can I go for this?? Pls suggest.

    1. I am not aware about it , so cant comment, can you open a thread to discuss about it at our forum – http://www.jagoinvestor.com/forum

  10. Suchi says:

    Hi Manish,

    Can you please tell me the difference between e-gold and gold etf ?

    I can invest 1-2,000 per month in this and I don’t mind buying anyother metal also, if it is profitable. Also, I don’t require it in physical form.

    Please suggest which one is better.

    Do I need to open trading and demat account both for investing in either of the two?

    Please let me know in terms of service and brokerage, from whom I should get my demat account openned?

    Sorry for so many questions, this will be my first investment 🙂

    Thanks,
    Suchi

    1. e-Gold is traded at different stock exchange , Gold etf is traded at stock makrets ,here is the difference – https://www.jagoinvestor.com/2010/09/invest-in-gold-and-silver-through-e-gold-and-e-silver.html

  11. Suchi says:

    Hi Manish,

    I think I have found the right person who can answer my questions.

    I want to invest in gold monthly(1,000-2,000 per month). Do not require it in physical form, just need profit 😉

    By now, I think Gold ETF and e-gold are most attractive but m not very clear about the difference between the two.

    Also, do I need to open trading account and demat account both for investing in any of the two?

    In future I don’t mind investing in any other metal too. I think, I can avail this facility in case of e-gold but m not very sure about gold etf.

    Please let me know which one can be the best option for me and from whom I should get my demat account openned?

    Thanks

  12. Sravi says:

    Hi Manish ,

    Thanks for the wonderful article again. I want to invest in gold (not in physical form) for my kid’s marriage and now she is 2 years old. please help me in which form of investment is good for me in long term considering all the charges.

    1. Shall i get demat account and invest in gold etf ?
    or
    2. Shal li invest in gold saving funds through SIP.?
    or
    3. Shall i go for e-gold?

    Please throw some light on it.

    Thanks,
    Sravi

    1. You can start with gold saving fund through SIP , it will be like buying mutual fund only !

      1. sravi says:

        Hi Manish,

        But, gold fund eats most of our returns by charges and gives less returns. wat say?Further research seems e-gold looks good with charges wise and returns wise also its comparative to gold etf and gold fund. But one time demat account opening is required. Wats your thoughts on it. do you think e-gold is risky in any way?

        Thanks,
        sravi

        1. Your analysis is correct !

  13. Ram says:

    Hi Manish

    I found different banks are charging different premiums for Gold coins (in some cases, it is more than 15%) and Banks will not buy back the Gold. Then, there is no point in investing in Bank Gold Coins.

    I found some reputed jewelers are selling the Gold coins/bars at Market value of 24ct. And they will buy back also.

    Hence, I hope out of all the above options listed and detailed by you, purchase of Physical Gold coins/bars at ‘No Premium’ from Reputed jewelers is the BEST OPTION.
    I hope this is the main reason for its popularity among Middle Class Indians. I think more than 70% of Gold investment in India is done in this form only (Physical Gold bars purchased at Reputed Jewelers at No Premium charges).

    Request you to pl. correct me if I am wrong.
    Regards, Ram

    1. Ram

      If you are comfortable with jeweellers , then you can go ahead, but i m sure the chances of getting pure gold from bank is always higher , what do you say ?

      1. Mr.Manish, Pure gold buying from bank is not that much easier..In jewellery shop they gold testing machine and we can check and now a days you can check anywhere apart from where you buy.If we prove with loss of purity they will just refund or they will replace.But in bank price is little bit higher than shops and also only coins can be purchased…Your articles are excellent and keep writing as now usefully…All the best..Is there a chance of guest post?

        1. Vandana

          THanks for you comment 🙂 .

          We do not take guest posts randomly,. we do it only when we know the person from long time and if he/she can give some thing related to persoanal finance (no stock market stuff) and somewhich does not exist already on the blog .

      2. prasanna says:

        i read in some news articles that banks are offering loans with e-gold as security
        can you tell me the names of some banks which offers e-gold or e-silver as
        a pledge and sanctions loans

        1. I have not heard of this till now, can you share the news source !

          1. Yes .. with this , it looks like some banks have started taking that , but which banks it not clear, so you need to ask to banks if they take it or not

  14. smitha says:

    Hi Manish,

    You wrote that at the time of selling gold, there is a discounted price of 5% to 10%. We have bought gold coins before and they said if it is the hallmark variety, we will get the price of gold prevailing that day. No discounts or whatever.

    Could you tell me what is this discounted price at the time of resale of gold coins/bar?

    1. Smitha

      The meaning for that was that if you sell gold coin/bar , you get lesser price than market price .

  15. Archana says:

    Dear Manish

    Plz help me out… i m a married women having a 2 yr baby girl. I m worried about her future as gold prices are soaring up. I earn around 12K by taking tution. I want to invest in eGolf for her. Plz guide me as i have a demate account with sharekhan but they not offering ONLINE NSEL account and they also not mush aware about the various charges. Plz guide me about the various charges and from where i should open this account as i need online facility.

    Thnaking you in Advance.

    1. What you should do is buy Benchmark Gold ETF from your existing dmat account, atleast your money will grow in gold prices, when you need gold in future,liquidate the money and buy gold .

  16. Ravi says:

    Dear Manesh,

    I greatly appreciate the efforts you and fellow writers have made for this article. Can anyone elaborate on the tax implications including wealth tax, income tax, etc. on the above ways to invest in gold?

    1. What info you want exactly , put them point wise !

  17. KRANTIVIR RAJPUT says:

    Thank You Manish for A GOLDEN ARTICLE on GOLD!!!

  18. Ujjwal says:

    Very nice article ! Just a day ago (while browsing through the content on your site) I was thinking how to invest in Gold other than physical form !
    But for me the best option is Jewellery, which helps me invest and also makes my wife happy [& she doesn’t feel bad when I spend on my gadgets] 😉

    1. Good to hear you got your answer !

  19. pramod says:

    Very nice article. I am yet to understand-If one does not require to convert e-gold to physical one, is there any difference between e-gold and gold ETF in terms of charges. Please clarify.
    regards, pramod

    1. Yes . NSEL has different kind of charges (lower than ETF) , then it is linked to indian gold unlike ETF which are linked to international price

  20. Chandrashekhar Subramanian says:

    Manish

    This is a nice article, thanks

    What do you think about “SBI Gold Fund” this is an open ended fund of fund scheme, which will invest in units of SBI Gold Exchange Traded Scheme (SBI GETS) ?

    1. Yea its a gold saving fund like others itself , if you do not have a demat account and want to invest per month basis , you can go for it

  21. Siddhant says:

    I think the factor of taxation should also be considered for this purpose.
    Here is my 2 cents on taxation,

    http://khotapaisa.blogspot.in/2012/04/normal-0-false-false-false-en-us-x-none_30.html

    1. Thanks for your views

  22. shashank says:

    Hi Manish

    I don’t have a demat account as of now so for me it should be Gold Savings Fund but gold savings fund are invested using gold etfs so therefore I would be paying more charges , but benefit of gold savings fund is we can start with SIP which is not there in etfs.

    Since I’m looking for long term investment (say more than 5 years ) which idea will you suggest ?
    1. open a demat account and buy etfs
    or
    2. invest in sip through gold savings fund.

    regards
    shashank

    1. SIP in gold saving funds would be ideal for you , however note that through fundsindia you can do SIP in ETF’s also !

  23. Deepak says:

    Hello Manish,

    Another nice article….

    My choice is to go with both Physical gold and Gold ETFs.

    In India, buying gold is a tradition, which will be used mainly for the family transactions.. (marriages, birthdays, functions of grand children… etc..). So in my knowledge, buying physical gold is mandatory for any family…

    And then Gold ETFs to make your portfolio more shiny with the advantage of gold return and liquidity……

    Correct me if i am wrong..

    Regards,
    Deepak

    1. You are right . I think the mix of Physical gold and ETF is very good in general

  24. Krish says:

    Ever since Gold is part of commodity, the trading had started and ofcourse several of these options. Our previous generations never bought the gold for the purpose of investment. It is bought rather as consumption means you never intend to sell it and keep passing it on to generations. This gives an important clue. Don’t ever buy assets for investments. In 30-50 years, it would go through many cycles and the real value of it would emerge often providing great benefit to the recipient.

    I do not think any one would set for that kind of period. All the paper and trading instruments have expenses which erode returns and in 30 years the fixed annual fee would only benefit service providers and trading brokers.

    Any day I would buy gold ornament as a value enhancement for the wearer. The selling part never cross my mind. At least my wife and daugther are happy.

    1. Thats one good way of looking at it .. While you will buy it for consumption and not investing , in reality the investment is happening automatically and deep down you know its your emergency fund if really required 🙂 . Thats the best part of gold 😉

  25. AMIT DOSHI says:

    Hi
    Nice article. To share my view for accumulation of gold in case of minor….

    My son is 3 yrs old and he has his PAN Card and demat account when he was just 3 months old. Since then on every 1st of month, I am investing in 1 unit of Kotak Gold and till now accumulated approx 4o units. As far as accumulation part is concerned for the benefit of minor, I feel that this is the right option but one has to take a systematic call every month without fail. And till now I am on track. Even sometimes my broker gives me a reminder call on 1st to convey me about the purhcase of 1 unit of KOTAK GOLD. Hence this is far the good option to accumulate units of gold for minor which is easily encashable and with that money, one can always buy physical gold.

    1. Yea Amit

      agree with you , the major point is convinience.. Why dont you start an SIP in gold ETF , Fundsindia provides that feature

      1. AMIT DOSHI says:

        Ok Manish.. I was not aware about SIP in GOLD ETF.. I think Gold Savings Funds only as ETF units are required to be obtained in Demat form only..

        Can you pls throw more light into SIP in Gold ETF..

        1. No no . You are confusing . Generally SIP can be done only in Mutual funds , not stocks , but ETF is like a stock , so SIP in ETF was not possible , but fundsindia through its platform gives SIP in ETF’s also .

  26. suhas says:

    Hi Manish,

    You must be aware…. I invest in Reliance Gold Saving Fund by monthly SIP and GOLD ETF Fund also monthly through ICICI direct as per recommendation from my FP…:))
    The only thing is I don’t come to know the charges incase of Reliance whereas incase of ETF the brokerage charges I can see it up-front and these are as high as Rs40
    (incase of ICICI direct) for every transaction.
    That upset me most so I was looking for some cheap brokerage option but could not find any competitive services till now.

    I think if your gold invest per month is less then 1g(say Rs 3k) then MF is good (you can have Rs 500 also invested in underlying commodity) or else ETF is good.
    The brokerage cost need to be justified and you cannot buy below 1g or 0.5g incase of some gold ETFs.

    Good thing about these unit holdings is
    1.At the time of goal realisation we can liquidate only the required amount and remaining units can be left to compound till any further
    requirement.
    2. No locker/insurance charges need to be born by us.
    3. Question about purity-I recently saw a sting operation in bangalore by news channel regarding almost all shopkeepers selling of 18 carat physical gold ornaments (
    Gold purity of about 75%) as it is 22 carat ornaments(91% pure) gold.So in above case there is no impurity.

    1. Why dont you look at FundsIndia . they also offer SIP in gold ETF 🙂

      1. suhas says:

        They too have the min charge of Rs 32 below Rs 8000 transaction,which makes a difference of jst Rs 8 compared to ICICI.
        On top I have to pay for account opening of Rs 500 extra.
        Yes,there annual charges are definity low compared to ICICI.But i have been using ICICI from last 7 years so it ok……….Looking at gold trends brokarage will not really matter in long run..18yrs:) I guess.

        1. Suhas

          Yea , given the comfort level , A little bit more is ok !

  27. Prasoon says:

    Nice article Manish!
    Being a staunch supporter of SIP, I use Option 4 ‘Gold savings Fund’ and will keep using that. Best part is that I can invest even Rs. 500/- in it.

    A suggestion – why don’t you add a voting option to assess JI user’s preference? I think that the result would be interesting to know.

    1. You mean user experience for each article like some kind of rating system ?

      1. Prasoon says:

        I refer to those articles (including this one), where you ask in the last something like – ‘Which option are you going to choose and why ?’.
        It would be really great if there is a voting option with all the six/seven choices you already provided in your article, and obviously a last one – ‘Other (Please specify)’.

        Well that’s what came to my mind, and so, just thought to ask you :)\

        Prasoon

        1. Prasoon

          Yes good idea .. I should be going it from next time whenever it feels that its required

  28. Shrenik says:

    Thnx Manish.

    Nice article …really covering all the aspects relate to Gold Investment.

    However I prefer e-gold as most suited for investment because it is not only having all the advantages of non-physical gold but also the option to covert in physical form in case of need.

    I feel that administartive charges in case of e-gold ( considering 0.25% brokerage offerd by my authorized broker) are minimum…..what is your opinion???

  29. Sajna says:

    I would give my vote for Physical Gold, As I come from a place where a good amount of Gold is given away during marrgs(not as dowry,of course.. both from parents and as gifts from relatives). I myself have got some ornaments, which I prefer to use for my daughter’s wedding :)) She is just 1 now, but by the time she is grown up, these could be reused as most of it is traditional make and would be worth storing for future.

    Many a times this gold has helped us in taking jewel loan at a lower interest rates for various purposes. Also coins cannot be kept on loan. banks do not accept it.

    So if you have a daughter who is growing up, it is better to buy small jewellery and store it for future… :))

    1. Thanks for your views on this topics . Which bank do you take the loan from ?

      1. Sajna says:

        Hi Manish,I have taken from IOB recently. The rate of interest is 7%.
        and the max limit you can get is upto 3 Lakhs in a year.

        Had enquired in SBI some time back, its also almost the same.

        1. Sajna says:

          Also, in gramin bank(a local bank here in northern Kerala) the rate of interest is as low as 4 %

          1. Raja says:

            IOB, 7% ? Local Bank in Kerala 4% ? Doesn’t it sound any alarm bell with you Manish ?

            1. IOB I dont think there is much issue , but some suspicion is there with the local bank 🙂 . Note that GOLD loan rate also depends on how much loan are you taking against the total worth . I mean if you give gold of 10 lacs and want to take loan of 5 lacs , dont you think anyone would be able to lend the money , because you have secured asset (only if prices drop 50% , then only you are at loss) .

              4% is something little fishy 🙂

              Manish

            2. Raja says:

              You are right about the security part. But that comes into question only when we are talking about possible default, right ?
              For loan rate though, they also have to consider the cost of funds too.
              In the current scenario IOB’s cost of funds is roughly 7-8% (pg 17 AR 11-12) and NIM is 2.75 (page 4 11-12 AR).
              I doubt if they are giving it at 7% fixed rate which is roughly 14% in reducing balance rate. Only then it makes sense to me. May be you should consider doing a post about busting the myth between fixed rate Vs reducing balance rate.
              In earlier days i had faced problem understanding that.
              Also, IOB’s current base rate is 10.5 and as per RBI rules that’s the minimum rate at which the bank can lend. So, another reason why i doubt the 7% rate figure.

              Regards
              Raja

            3. Sajna says:

              HI Manish,

              The local bank i am talking about is North Malabar Gramin Bank(It is given for fully agricultural purpose only..) the main drawback is they lend only 1 Lakh per year. Until last year it was 4%. I had availed from there only. I closed the loan earlier this year.

              Moreover, nationalised banks like IOB and SBI lend at a rate of interest of 7% . I took the AJL for a sum of 2 Lakhs last month.

            4. Manyam says:

              Yes! most of the public sector banks are offering 6-7% on agricultural gold loans. If not declared as agriculture loan, the rate of interest is >12%. I know so many people in small cities will get gold loans from different banks and lend for people in need for 3-5 rupees interest (36% to 60%).

              By the way, co-operative banks will give lesser rate of interest on gold loans of course they give without gold also up to 1 Lakh. We need to show our agriculture land papers to them.

            5. Ok , so its low interest because you take loan for agri purpose , else it will be higher !

            6. These rates are for “agricultural loan” , means loans used for agri purpose . Note sure what are RBI rules for that 🙂 .

              Manish

            7. Raja says:

              Yup. May be it’s subsidized in some way by the Govt. Else i’ll be surprised if bank’s lend at less than base rate.

            8. Biju says:

              The 4% scheme may be under the farmers scheme most banks are offering loans up to 80% of the value of gold deposited by farmers at an interest rate of 4% after subvention. Under the interest subvention scheme of the Centre, banks provide agriculture loans for a year at 7% interest. It offers an additional 3% subsidy on timely repayments, bringing down the effective interest rate to 4%. Most peoples who owns a bit of land can use this scheme and get gold loans at cheap rate.

            9. Thanks for this information, didnt knew this !

            10. Abhijeet says:

              & the best thing is that despite being AGRI loan the land is not loaded with loan on 7/12 extract, & only security will be gold, I had seen some people taking this loan & reinvesting in FD at 7.5%(6.5% after 7th Sept 2012) & also saving on LOCKER CHARGES as well :):)

  30. Sambaran says:

    I do not know of any branded/well-known establishment, that buys gold-coins/bars and gives money in return. This is one of the reasons I am lukewarm about physical gold as an investment.
    If anybody disagrees and knows about reputed establishments which buy gold (I mean really buy, not giving jewellery in return), please respond to this post.

    1. Sambaran

      Yea .. Its true that physical gold is not that much liquid which people claim !

  31. C M Vyas says:

    My vote is for option 5 eGold. Though not popular it is the safest but with lower returns. I will explain as under:

    a Gold ETFs are priced based on what the seller wants (in a buy situation) and what the buyer is willing to pay (in a sell situation). The number of transactions is not high and hence there is always a huge premium/ discount to current spot prices. Liquidity of certain ETFs is very bad.

    b Gold Ornaments: Indians have always been buying ornaments. Here we need to understand that this is consumption buying and not investment buying. While consumption buying is relatively inelastic, the investment buying follows a buy at lower levels and sell at higher levels. Consumption buying cannot be used as an investment tool as there are substantion making charges and wastage at the time of selling etc. Investment buying does not happen in ornaments. Yes, parents do invest in gold ornaments for their daughter’s wedding. that is a matter of speaking.

    c Gold Investment Buying: This option does not exist for physical gold. You can buy physical gold but would find it very difficult to sell the same. The recent price spikes above Rs 30,000 saw sellers unable to sell their investments. Since it involved carrying the gold for sale (verification of quality etc) the investor ended up accepting a lower price. Only institutions, jewelers and such entities can weather such situations.

    d Gold Coins etc available in the market can be of lower quality as I found.

    e Gold Savings fund: Who does it? Is there an organised player? Does he have the necessary clearances for it? If this is the same as “Pay 11 installments and we pay the twelfth for you” kind of schemes offered by Jewelers, then you can only buy gold from these jewelers cant cant get back cash. This is a different mode of option b above wherein the jeweler buys gold in monthly variable SIPs for you and benefits hugely through making charges etc since opening an installment plan is equal toadding to his sales one year hence. If the price increases, he plays on your capital to sell it to you at higher price. If it falls, the risk is negated by making charges and the sales still continue.

    f Gold futures is like stock futures and commodity futures. You need sound knowledge and so it comes in the realm of trading rather than investing.

    g Gold fund of funds: from the description given, I am sure most people would avoid it.

    In order for glod to be a good investment vehicle it must be easy to buy, easy to hold, and easy to sell with least amount of transaction cost. In addition if it then becomes a speculative vehicle also, it will provide a higher level of liquidity. The concept of eGold needs to be propagated for it to be a great investment vehicle.

    1. Thanks for sharing your views on this topic !

      1. BR Singh says:

        Hi Manish,
        Thanks for writing this article. Do you remember i sent a personal email to you requsting to write on best gold investment options few days back? After requesting you i also did some research and confirm you that eGold is the best option. Its secured, safe, transperent and whenever required can be converted to physical gold. I have also few obeservations that can compliment to this article and other’s observations.

        1. I don’t see any reason in investing in physical gold because with eGold we can convert it back to physical gold whenever we wish. Jwelly is not an option to invest as when we resell it we lose the making charges.

        2. Gold ETF can be next better option but if you are also preferring to invest in othr metal such as SILVER, PLATINUM, COPPER, NICKEL etc. currently there is no option other than NSEL. As a lot of talks going on SILVER currently and if any metal does suprisingly well in future NSEL will be the first to give the option to trade the metal as compared to banks which are slow in giving metal investment option. With this demat account you are not limited to buy only gold, you can buy other metals also.

        3. Gold saving fund again use their own gold etf to invest, so here also we are chared twice once for gold saving fund and i think the etf charge is hidden. Its better to go with gold etf rather. Gold saving fund option is only good when you have very small monthly amount to invest as a SIP.

        1. BR Singh

          Yea i remember your email and this article has come out because of that only 🙂 .I realised that this is a good topic to write on . I have few comments on what you said

          1. What you said is purely from “investment” mindset . See what Krish feels and I think he is right in his own sense (https://www.jagoinvestor.com/2012/06/best-way-to-invest-in-gold.html#comment-46642) . you are right too 🙂

          2. I do not agree too much here with you . I think you are some where still attached to that “physical gold” thing . What is the difference between

          a) Buy e-Gold & then converting in GOLD when you want (after 3-5-7 yrs)
          b) Buy Gold ETF , Sell the Units when you want gold and from the money you get , go buy gold !

          I think option a) gives us a psychological feeling that we can get Physical gold when we need . But option b) is almost same , just that it would be more easy for us to do it

          Do you know that NSEL gives physical gold , but at the time of conversion , i think there is some fees (small) , they give it only in some selected cities and there their is transportation of gold form them to you etc etc .. why not just have money in gold etf , sell is when you want, take the money in your account, buy it the way you want ..

          The issue with NSEL is that they will give you gold in bar or coins form , you anyways have to give making charges etc to jeweler , and dont think they will buy it at MARKET PRICE 🙂

          Manish

          1. BR Singh says:

            Hi Manish,
            Thanks a lot for replying. I have read your book and posted my review in flipcart also. Last month starting believe me my finance knowledge was zero. Its only because of your book and your website i am able to participate in these discussions which i had no clue before one month. Hats off to you.

            Coming back to this article i am not in favor of investing in physical gold. It is useful when we need a loan at better interest rate. Gold etf is just a subset of eGold. With NSEL demat account we can not only trade in gold also on silver, platinum etc. Initially i was also tempted to use gold ETF. Then i read many of your articles where you suggested to invest in SILVER but unfortunately there is no SILVER etf. So again i started to search other options and came to know about NSEL. Since then i have read many articles on eGold vs Gold ETF and every where i found that Gold ETF is inferior to eGold. Below is one link
            http://articles.economictimes.indiatimes.com/2011-08-30/news/29941738_1_physical-gold-e-gold-gold-etfs-offer

            But yes Gold ETF is the next best option to invest in Gold.

            1. Good to hear that .. thanks for sharing your views 🙂

  32. Kiran says:

    Very nice info. Thanks for sharing. For me “Gold Saving Funds” is simple and safe option to go with. No need to track it on daily basis.

    1. Good to know you got your option !

  33. Sushil says:

    Dear Sir….The Article is good but at last pls give your conclusion which option is best….

    1. Sushil

      Do you really think there can be best option ? Thats why this article is there .. a person has to choose as per their requirement , what is best for me can not be best for you , Its like asking , which boy is best for marriage ?

      1. Sushil says:

        It is very right that nothing can b best. What is best for u can not b best for me…i agree…but still considering my case what would u suggest…me 35 yrs engineer..having demat a/c Dont need physical gold….medium risk taker and have good knowledge of futures also….can invest 1000 rs per month what would u suggest me?

        1. IN that case Gold ETF or Gold SIP funds are best suited

          1. Raja says:

            Manish,
            The moment Sushil said “have good knowledge of futures also” , i thought you will leave the decision to him 😉
            How can you suggest something to a person who knows ‘futures’. ha ha ha just kiddding…

      2. lakshminarayan says:

        only such form of investment is best where physicial delivery of gold may be taken any time with least exit charges.

  34. Rupanjali says:

    very well written article manish

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