Gold has been a favourite investment for Indians for generations. With gold prices touching new highs, it may not seem like a good time to buy, however, decisions to buy the metal cannot be based on temporary trends in prices. Further, with anticipated economic slowdown and continued geopolitical tensions amid US-China trade war, prices are likely to climb higher as investors seek refuge in the safe-haven metal.
If you wish to add the metal to your investment portfolio, here are some unconventional ways to purchase gold.
1. Payment Apps
Popular payment apps today allow you to purchase gold over your smartphone in quantities as little as 1 gram. Some apps even allow you the option to get gold delivered to your house.
24 carat gold of 99.9 percent purity can be purchased over Google Pay, Paytm, PhonePe and MobiKwik, all leading players in the business.
These companies have a tie-up with bullion refiner MMTC-PAMP India to allow users to buy as well as sell the metal on these apps.
On Google Pay, users can purchase gold for as little as one rupee at the latest price and the quantity will be stored on their behalf by MMTC-PAMP.
One can keep buying gold as and when the can at prevailing rates in their "Gold Account". The accumulated gold, which will show the value of the balance at current rates can then be redeemed at a later stage.
The delivery of physical gold (in form of gold bars and coins), pricing or sales services will be handled by MMTC-PAMP, while the app acts as an intermediary between the government body and the customers.
2. Gold ETFs
If your interest lies in earning on the investment and not possessing the gold in physical form, ETFs (Exchange Traded Funds) are a good option as they allow you to own gold virtually on paper.
If you aren't aware, ETFs are like mutual funds where investor-money is pooled together to invest in a certain category of assets. In case of gold ETFs, the underlying asset that the ETF derives value from will be standard gold bullion of 99.5 percent purity.
Ideally, buying one unit of gold ETF will mean an investment in 1 gram of gold. You do not have to worry about purity and making charges like you would while purchasing jewellery or bars of gold.
All you need is a trading and demat account with a broker. These can be bought and sold during market hours as they are traded on NSE and BSE by asset management companies. It is like holding gold in demat form.
Gold is less riskier than equity as the price fluctuations are not dramatic. When gold price falls, the ETF's value falls and vice versa. The transparency of price, considering that it is listed in the stock market, is an advantage.
While there are no entry or exit charges like in a mutual fund scheme, there is brokerage cost and expense ratio (for managing the fund) that comes with Gold ETFs.
3. Gold mutual funds
These are open-ended funds that invest in gold ETFs. The plus-point is that it allows you to advantage of gold price fluctuations and professional fund management to make a profit.
There are expert fund mangers who will closely watch the market fluctuations of gold ETFs and decide the move to make maximum returns for its investors.
Again, these are meant for people who are looking to diversify their investment portfolio by investing in gold and not interested in physically possessing it.
The returns you make will be reflective of price fluctuations in the commodities market for gold.
Further, unlike gold ETFs, mutual funds allow you to opt for SIPs (systematic investment plans) to make regular fixed investments while also investing in gold ETFs. However, the asset management company will charge you an exit fee if you withdraw before the end of the lock-in period.
4. Sovereign Gold Bonds
These are bonds issued by the Government of India and allows subscribers to buy gold in demat form.
The interest fixed on these bonds at present is 2.5 percent.
A resident Indian can buy a minimum of one gram and a maximum of 500 gram in a fiscal year.
You can read the detailed features of these bonds here.
However, these bonds are only issued as and when the RBI decides. The recent issue, that is- 2019-20 Series III, opened for subscription on 5 August. The next one- that is 2019-20 Series IV will open on 9 September.
These are sold at commercial banks, selected post offices and also at the stock exchanges.