Gold which holds a predominant position in every household in India is not only used as an ornamental metal but also acts as a tool to tide over financial difficulties. The yellow metal which is touted as the safest form of investment is witnessing a rally in its prices since the outbreak of the coronavirus crisis.
The demand for the precious metal is on the rise since the beginning of the fiscal year 2020. Thus, the purchase of gold has traditionally been a financial support system since ages.
Gold can be purchased in its physical form or through paper form. Physically gold can be bought in the form of jewellery, coins, bars. Through a paper form, Sovereign Gold Bonds (SGBs) and Gold Exchange Traded Funds (ETFs) can be bought.
Apart from this gold mutual funds also exists which is a type of mutual funds which directly or indirectly invest in gold reserves. Here investments will be made on stocks of gold mining companies, gold producing and distributing syndicates.
India is a gold loving country and hence we have acquired the second position globally when it comes to consumption of physical gold. Jewellery form of gold can be purchased from jewellery shops which are present across the length and breadth of the country.
But purchasing gold in physical form and safeguarding it will have its concerns be it safety, cost, changing designs and so on.
Most of the jewellers will levy making charges on the ornamental metal which ranges anywhere between 5 per cent to 40 per cent (in case of special designs). These charges are irrecoverable.
Gold Saving Schemes
Many jewellery shops ranging from small ones to big branded stores do run the gold saving schemes. These gold saving schemes comes in two forms. The customer will deposit a fixed pre-decided amount every month for a set tenure.
On completion of the term, the customer can purchase gold from the jeweller at the total accumulated value which is equivalent to the total amount deposited during the set tenure which also includes a bonus amount. Here, the conversion is done at the prevailing gold prices on maturity.
In another form, the customer will pay a fixed deposit for certain tenure and the jeweller will add a month's instalment at the end of the tenure in the form of cash incentive or jeweller can even offer a gift item.
Customers can even purchase gold coins from jewellers or banks or e-commerce web portals or non - banking financial institutions. These gold coins are available in denominations like 5 grams, 10 grams, 20 grams. All the gold coins in India will be hallmarked as per the BIS standards. Gold coins will be of 24 karat purity.
Sovereign Gold Bonds
The sovereign gold bonds or SGBs is a form of paper gold. They are issued by the government of India and are denominated in multiples of grams of gold. The sale of these SGBs will happen once in every two to three months and the window will remain open for around a week. Investors who are willing to purchase SGBs can purchase it once the window is open.
SGBs are substitutes for investment in physical gold. If an investor wishes to purchase bonds, then they will have to pay the issue price in money to the authorized SEBI broker. Post redemption, the cash will be deposited into the investor's registered bank account.
Gold Exchange Traded Funds (ETFs)
A Gold ETF is a commodity-based mutual fund which invests in assets like gold. These ETFs perform like individual stocks and are traded similar to other stocks in the stock exchanges. ETFs represent assets, both in dematerialized and in paper form.
An investor will invest in stocks instead of the physical form of metal and once it is traded, they will be credited with the unit's equivalent in money instead of actual metal.
ETFs are traded on stock exchanges in India both Bombay Stock Exchange and National Stock Exchange, wherein gold will be used as an underlying asset. Buying gold in the form of ETF is advantageous as the investor need not have to shell out money on making charges, wastages of the gold and transparency in pricing is another added advantage.
All that an investor needs to purchase ETFs are to have a trading account with a demat account and a stockbroker.
The advancement of technology has provided investors with an opportunity to purchase gold in the form of coins, bars and jewellery online. The ‘Digital Gold' is offered only on the mobile wallet platform by Paytm and Stock Holding Corporation of India offers ‘GoldRush'.
The Digital Gold helps investors to purchase, sell and accumulate gold infractions. The digital gold is being offered in association with Augmont, MMTC-PAMP.