1.1 Physical Jewellery
- Gold in the form of Jewellery is not only used as a wearable but also works as a tool to tide over financial emergencies. So, buying gold has traditionally been a financial support system over the years.
- Having physical gold raises concern about safety, high costs and outdated designs.
- There are high making charges which may typically ranges to 6-14 percent of the cost of Gold.
1.2 Gold Coins Scheme
- Govt has launched indigenously minted coins which will have the National Emblem of Ashok Chakra engraved on one side and Mahatma Gandhi on the Other.
- These are available in the form of coins and bars.
- Coins are of 5 and 10 grams and Bars will be of 20 grams.
- These are of 24 Karat purity and 999 fineness carrying advanced anti-counterfeit features.
- We can buy these coins from Jewelers, Banks, NBFC and E- Commerce Websites.
- These Coins are distributed through designated and recognized MMTC Outlet. They can sell and purchase the Gold Coins.
1.3 Gold Saving Scheme
- This scheme is being run by most of the Jewelers in India.
- Under this scheme, a person is bound to deposit a fixed amount every month for the chosen tenure.
- At the end of the tenure, you can buy the gold which is equal to the total amount deposited and bonus thereon.
- These scheme are run by Jewelers to Boost the Sales and have a fixed customer base for long term.
- Since, there are no clear guidelines & regulation by Government, hence chances of default are high.
2.1 Gold Exchange Traded Fund (ETF)
- Gold ETF is a commodity ETF that consist of only one principal Asset i.e. Gold. ETF are just like shares and they are traded on an stock exchange in the similar manner.
- A Gold ETF gives an investor an opportunity to gain exposure to the performance, or price movement of Gold.
- The Investment in Gold ETF is safe, because it is mandatory for issuer to hold physical gold and store in the secured vaults and have full insurance of the gold.
- Since these are tradable in stock exchange, there are many issuers of the Gold ETF. There are 27 types of ETF tradeable in NSE Platform.
- Due to its unique structure and creation mechanism, ETFs have much lower expenses as compared to physical gold investment.
2.2 Gold Sovereign Bonds
Key Features of Gold Sovereign Bond Scheme:
- Issued by Reserve Bank of India (RBI) on the Behalf of Government of India.
- Bond holders will get Interest on the Bonds. Currently, Bonds are issued with fixed coupon rate of 2.5% annually which will be paid to Bond holder on Semi- annual basis.
- Return of the Bond holder is directly linked to price of the gold.
- Bonds carry sovereign guarantee both on redemption amount and on the interest.
- Investor can hold bonds both in DEMAT form and physical form.
- Investor can purchase the bond in cash only for Rs 20,000. If he purchases through digital mode, then he can purchase up to the threshold limit.
- There is a discount of Rs 50/gram (in Current Bond Issue) on purchasing through digital mode.
- Bonds Acquired by the Banks through the process of invoking lien/ hypothecation/ pledge alone, shall be counted towards Statutory Liquidity Ratio (SLR).
Benefits of Investment in Gold Sovereign Bond:
- Since, these are Bonds, there is no risk of holding Physical Gold.
- Regular Income in the form of interest.
- Tax Benefits:
(a) Interest will be Taxable under Income Tax Act. However TDS will not be deducted.
(b) If Bonds are transferred before maturity, then at the time of calculating capital gain, Investor will get the benefit of Indexation.
(c) If Bonds are sold on Maturity, then capital gains are exempt from income tax.
- Gold bond prices are linked to price of gold of 999 purity (24 Carat).
- Gold Bond can be used as collateral for loans and it is easily acceptable by every lender.
- The tenor of the bond is for 8 Years with an option to redeem from 5th year onwards on the date on which interest is payable.
Who can invest and the threshold limit:
- Only Resident Individuals, Hindu Undivided Families (HUFs), Trusts, Universities and Charitable Institutions can purchase.
- The maximum limit for buying by Individual and HUF is 4Kg and 20Kg for Trusts, Universities and Charitable Institutions.
- The above Limit is on financial year Basis. It means an Individual can purchase 4kg of gold in one financial year and next 4 kg in next year and so on.
- This ceiling limit includes both bonds purchased from primary market and secondary market. Purchaser will file a declaration before purchasing.
2.3 Digital Gold
- You Can Purchase Gold Coin, Gold Bars and Jewellery online.
- Digital Gold is offered on the mobile wallet platform of Paytm.
- SHCIL* also provides facility of purchasing gold in digital mode using Gold Rush Scheme.
Benefits of Gold Rush Scheme:
- Buy Gold 24/7 Online.
- Gold accumulated under this scheme is safe from theft and other risks as it is stored in a special vault and covered by Insurance.
- Gold Provided is of 999.9 fineness & 24 karat purity .
- We can also take physical delivery of gold accumulated in Gold Rush Account. Minimum amount of delivery is of 1 gram.
- We can invest minimum of INR 1 and in multiples thereof. However, first transaction should be of minimum INR 100.
- Since it is in digital form, there is no need to go market to sell and purchase.
Why to Invest In GOLD?
- As per WGC( World Gold council) Report, “The Relevance of Gold as a Strategic Asset” India Addition issued on 24th March, 2020 that globally demand for gold for investment purpose has grown by average 14% p.a. since 2001 and price has increased almost 8 times over the same period.
- Gold has also given almost average 14.1% p.a. return in INR term since 1973.
- Gold also protects investors against extreme inflation, in years when Indian Inflation was higher than 6%, gold’s price increased 11.5% on average. Gold has not just preserved capital but helped it to grow.
- The Research of Oxford Economics shows that gold should do well in the periods of deflation.
- As per WGC Report, there are three trends which reshaped the Gold Demand:
(a)Consumer demand for gold increasing. As per report, in 1990’s India and china’s combined demand was 25% of global gold demand. Today, it has reached to 50%.
(b)Demand from institutions is increasing very fast due to introduction of Gold Backed ETF’s and similar products. Presently, ETF’s and similar products have demand which is equivalent to 1%. They are expecting that demand will increase rapidly in coming years.
(c)Demand from central banks is increasing rapidly. They are net buyers since 2010 and more recently, they have purchased multi decade record amount of gold, using the asset to diversify their foreign reserves.