Physical gold is the most popular way of owning gold, either in the form of jewellery or gold coins
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Gold price in India is showing an uptick. Akshaya Tritiya is considered an auspicious day for any new beginning, from shopping to marriage. It is celebrated as a day when people purchase gold. So, let's take a look at the gold buying options in India, this Akshaya Tritiya.
Physical gold is the most popular way of owning gold, either in the form of jewellery or gold coins.
Sovereign gold bonds
Sovereign Gold Bonds (SGBs) are the perfect alternative to investment in physical gold. With these bonds, you can enjoy capital appreciation and also earn interest every year. These bonds, issued by the Government of India, also eliminate several risks associated with physical gold.
Gold Exchange Traded Funds (ETFs) invest in gold of 99.50% purity. Gold ETFs are linked to the price of gold. Each unit of a gold ETF is pegged to a certain value of gold.
An increasing number of people are also buying sovereign gold bonds and gold ETF, both available in paper form.
Gold mutual funds are commodity mutual funds that invest directly or indirectly in gold. Investors can invest in gold through exchange-traded funds (ETFs).
Investment in Gold ETFs vs Gold Futures
Vijay Singhania, Chairman, TradeSmart explains the difference between Gold ETFs and Gold Futures
In Gold ETFs, investors get an opportunity to invest in gold back assets. However, investors have to bear the management fees, pay Demat fee and transaction charges on buying and selling both. Long-term investors may also have to bear high tax burden. On the other hand, there is no management fee in case of Gold Futures. Though brokerage and charges for extension of contracts have to be paid. The tax structure in futures is quite complex.
For those starting their gold investment journey, Gold ETF is the ideal instrument since it’s less risky and highly liquid. For those who comprehend the nuance of gold market can opt for Gold Futures since the returns are as high as the risk.
In case of Gold Futures, investor gets the opportunity to leverage. That is, even a short-of-cash investor can pay a small percentage of contract amount and place the bet. However, in case of Gold ETFs, investor has to pay the entire amount for the number of units he is buying.
Gold futures are more volatile, thus end up with high returns and high losses. The rollover facility adds to the volatility. Compared to Futures, Gold ETFs are less volatile and returns are very high."
Meanwhile, India's demand for the yellow metal declined sharply in the January-March quarter by 18 per cent to 135.5 tonnes, according to World Gold Council (WGC).
As per the report, the demand for gold was down 26 per cent to 94.2 tonnes on a year-on-year (YoY) basis.