Gold ETFs vs Gold Bars vs Gold Jewellery: Which One To Choose?

Updated: Thursday, April 1, 2021, 13:13 [IST]

For Indians, gold is the most valued and desired commodity. The yellow metal is used not only as a consumer item in the form of jewellery but also as an investment vehicle. Investing in gold also a great way to protect yourself from inflation and currency risk. Many countries have a heavy capital gains tax on gold. Gold trading is one of the easiest ways to make money. Gold can be used to make jewellery that can be sold and profited from. It is also possible to benefit simply from selling precious metals. If there has ever been a comparable commodity that has been appreciated immensely and throughout history for its worth, it is gold. The valuable yellow metal has long been regarded as a desirable commodity by people all over the world, including in India. Physical gold, Gold ETFs, and Gold Bars have, over time. But which is your most preferred option?

Gold ETF

An exchange-traded fund (ETF) that tracks the domestic physical gold price is known as a Gold ETF. They are gold-focused passive investment instruments that invest in gold bullion and are based on gold prices. In a nutshell, Gold ETFs are paper or dematerialized units that represent actual gold. One gram of gold is equivalent to one Gold ETF unit, which is backed by physical gold of exceptionally high purity. Gold exchange-traded funds (ETFs) combine the versatility of equity trading with the simplicity of gold investing. When you buy gold ETFs, you're buying gold in an electronic form. You can buy and sell gold ETFs in the same way as you can stocks. When you redeem the Gold ETF, you don't get real gold; instead, you get the cash equivalent. Gold ETFs are traded through a dematerialized account (Demat) and a broker, making them a very easy way to invest in gold electronically. Physical gold bars with a purity of 99.5 percent are used to reflect gold ETFs. Prices for gold ETFs can be found on the BSE/NSE website and can be purchased or sold at any time via a stockbroker. Gold ETFs, unlike gold jewellery, can be purchased and sold at the same price throughout India.

Gold Bars

If you buy a gold bar from a well-known refinery, it will have the highest purity standard. Inquire about the bar's refinement at the time of purchase. MMTC PAMP (a joint venture between MMTC and Switzerland's PAMP SA) and Bangalore Refinery are the two gold refineries in India. In the case of 24 karat gold, each of the 24 pieces is completely pure, with an exceptionally low level of impurities. However, 24 karat gold is the purest type of gold, since it is 100% gold, and it is ideal for investment purposes. Otherwise, if it's for personal use, go with 22 karat gold. Before purchasing a gold bar, it is essential to obtain a Hallmarked Certification. It is preferable to purchase gold bars that have the BIS (Bureau of Indian Standards) hallmark. The hallmarking system certifies that the piece of ornament conforms to a set of standards laid down by the Bureau of Indian Standards.

Gold Jewellery

Always check the purity of gold jewellery before purchasing it. Looking for hallmarking is the simplest way to search for purity. The official proportion of the metal is stated on a hallmarked piece of jewellery. The Bureau of Indian Standards (BIS) is the certification and hallmarking body for gold jewellery. Gold jewellery becomes a family heirloom as it is passed down over the centuries. Not only does jewellery have a high monetary value, but it is also often one of the finest creative pieces with a great deal of sentimental value. Machine-made jewellery or jewellery with little artwork would usually have a lower producing charge, which ranges between 6% and 14% of the cost of gold. When purchasing ornaments in bulk, some jewellers give fixed making charges.
The cost of producing a piece of jewellery with an intricate design is higher, which can reach up to 25% of the cost of gold.

Gold ETFs vs Gold Bars vs Gold Jewellery

Learn about the advantages and disadvantages of investing in Gold ETFs versus Gold Bars or Gold Jewellery.

Transaction Charges	Jewellery	Gold Bars	Gold ETFs
Purchase	Making charges of 15-20 %	Banks charge a markup of 10% to 20%.	The percentage ranges from 10% to 20%. A brokerage fee of 0.5% or even less is acceptable.
Sell	Due to purity issues, 10-20% of the product is lost.	Banks do not accept returns, the premium paid at the time of purchase is written off.	The brokerage of 0.5% or less is possible.
Maintenance	Charges for insurance and lockers	Charges for insurance and storage	1.00% charges
Tax Implications	Long-term capital gain, plus wealth tax after three years	Long-term capital gain, plus wealth tax after three years	Long term capital tax

Gold ETFs vs Gold Bars vs Gold Jewellery

Unlike physical gold, which is a source of idle money, gold ETFs are a type of investment that can be used to achieve both short- and long-term financial goals. ETFs that invest in gold are risk-free and do not need storage.

Returns on gold investments have always been in line with inflation, regardless of the rate of inflation. In a broad sense, it is an investment that outperforms inflation. Another important factor that encourages gold investment is its liquidity; it offers investors excellent liquidity.

You can never be sure when it comes to emergencies in life, so be financially prepared to face them head-on. You can rely on your gold investment in this regard because it is quickly liquidated in the market.