Gold has always held a timeless charm, captivating people across generations. However, with prices soaring to record highs, buying gold jewellery has become increasingly difficult for many. The good news is—you don’t need to purchase ornaments to own gold.
In this blog, we’ll explore practical and tax-efficient ways to invest in gold in India today. You’ll learn about the different options available, their pros and cons, and easy step-by-step guidance to help you choose the investment route that best suits your financial goals.
Why You Should Invest in Gold Besides Jewellery?
Jewellery often comes with high making charges, possible purity issues, and added expenses for storage or insurance—making it an inefficient choice if your aim is investment rather than adornment. Over the past year, more Indian investors have shifted towards financial gold options such as ETFs, Sovereign Gold Bonds, and digital gold, which provide lower costs, better liquidity, and greater price transparency.
Which gold investment options are available besides jewellery?
1) Sovereign Gold Bonds (SGBs) — Government-backed and suited for long-term investors
What they are:
These are gold-linked bonds issued by the Government of India through the RBI. You invest in rupees, but the bond value is tied to the price of gold (per gram). Along with potential price gains, you also receive a fixed interest payout.
Why they’re a good choice:
They work best if you plan to hold gold for the long run. SGBs come with an 8-year maturity and an option to exit after 5 years. You earn fixed interest in addition to any rise in gold prices, and the redemption gains at maturity typically receive more favourable tax treatment than physical gold.
Pros: Government guarantee, no storage or safety worries, fixed annual interest, and more cost-effective than jewellery.
Cons: Fixed maturity period, less liquidity (though they are listed on exchanges), and the interest you earn is taxable.
2) Gold Exchange-Traded Funds (Gold ETFs) — Liquid, low-cost, and easy to trade
What they are:
Gold ETFs are funds that hold physical gold and are listed on stock exchanges. You can buy or sell units through your broker on the NSE or BSE just like any other stock.
Why they’re popular:
They offer excellent liquidity, low management costs, transparent pricing, and eliminate the need for storage. They suit both short-term traders and long-term investors. Rising AUM in gold ETFs shows that more investors are choosing this route.
Pros: Instant buy/sell flexibility, low expenses, and straightforward access through a demat account.
Cons: Brokerage charges apply, there may be minor tracking errors, and taxation follows standard capital gains rules for securities.
3) Gold Mutual Funds (Gold Funds) — Ideal for SIP investors seeking expert management
What they are:
These mutual funds mainly invest in gold ETFs or gold-related futures. You can buy them through any mutual fund platform and set up SIPs easily.
Why they might suit you:
They’re great for those who prefer systematic investing and don’t want to deal with the intraday trading nature of ETFs. Although ETFs often deliver slightly better performance due to lower fees, gold funds provide convenience and help maintain SIP discipline.
Pros: SIP-friendly, professionally managed, and no demat account needed.
Cons: Higher expense ratios compared to ETFs, which may lead to marginally lower returns after fees.
4) Digital Gold — Very convenient, but be mindful of regulatory concerns
What it is:
Digital gold allows you to buy small quantities of gold online through various apps and websites. The gold is claimed to be backed by physical metal kept in vaults, and many popular consumer platforms offer this service.
Why it appeals:
You can start with tiny amounts and make quick, effortless purchases—ideal for beginners who prioritise convenience.
Important caution:
SEBI has recently highlighted risks around digital gold, as many offerings fall outside formal regulatory oversight. Always check who actually stores the gold, how it’s held, and whether the product is regulated. Use digital gold carefully and stick to reputable platforms with clear, transparent custody practices.
Pros: Low entry amounts and easy digital payments.
Cons: Regulatory grey areas, counterparty and storage risks, and possible hidden costs or spreads.
5) Physical Bullion (Coins/Bars) — For those who prefer holding gold in hand
What it is:
Physical gold in the form of bars or coins bought from certified jewellers, assayers, or banks.
Why some choose it:
It offers direct, tangible ownership without intermediaries. However, it typically comes with higher premiums—such as making charges, fabrication costs, and dealer margins—and requires safe storage and insurance.
Pros: A physical asset you can hold; culturally familiar and widely accepted.
Cons: Higher purchase premiums, storage and security expenses, potential purity concerns, and less tax-efficient compared to financial gold options.
How to Pick the best option for You?
1. Goal & time frame:
If you’re investing for the long term (5 years or more), SGBs or Gold ETFs are better suited. For short-term needs or active trading, ETFs are more appropriate. If you prefer small, regular investments, Gold Mutual Funds or digital gold (used carefully) work well.
2. Cost considerations:
ETFs generally offer the lowest costs because of their minimal expense ratios compared to mutual funds or physical gold.
3. Liquidity priorities:
ETFs offer the highest liquidity, followed by digital gold, then mutual funds. SGBs can be traded on exchanges but with limited volumes, while physical gold is the least liquid.
4. Regulatory confidence:
Stick to regulated products like SGBs, Gold ETFs, and mutual funds. Exercise caution with digital gold, as many options do not fall under a clear regulatory framework.
Steps to Begin Investing in Gold TodayTop of Form
1. SGB:
Track the RBI/Government auction schedule, then apply through your bank’s net banking platform or your broker during the subscription period. Choose how many grams you want to invest in, add a nominee, and hold the bonds either in your demat account or as a physical certificate.
2. Gold ETF:
If you don’t already have one, open a demat and trading account. Select a well-established Gold ETF with good liquidity, low expenses, and minimal tracking error. Place a buy order on the exchange just like purchasing any stock.
3. Gold Mutual Fund:
Use your preferred mutual fund app or distributor to invest via SIP or lump sum in a gold-focused mutual fund (which usually invests in gold ETFs/futures). Compare past performance and expense ratios before choosing.
4. Digital Gold:
Check the credibility of the platform—verify who stores the gold, whether audits are available, and the buy/sell spread. Understand the process for redemption or physical delivery, and invest only small amounts if you’re comfortable with the custody and terms.
5. Physical Bullion:
Purchase from certified jewellers or authorised dealers, ensure the gold is hallmarked or properly assayed, collect the invoice and valuation certificate, and make arrangements for safe storage.
Tax Implications and Cost Tips for Investors
SGBs: – The interest you earn is taxable. But on maturity, the capital gains treatment is usually more favourable than physical gold. Always check the latest Income Tax rules.
ETFs/Mutual Funds: – These follow standard securities taxation. Your returns may reduce slightly due to brokerage charges and the fund’s expense ratio, so compare costs before investing.
Digital Gold: – Be aware of buy–sell spreads and hidden costs. Regulators have cautioned investors to be careful because many platforms operate outside clear regulatory oversight.
Final Thoughts
Gold continues to be a valuable part of a well-balanced portfolio, especially during periods of inflation or market volatility. However, jewellery is not an effective investment option. By choosing financial forms of gold—such as ETFs, SGBs, gold mutual funds, or even limited amounts of digital gold—you benefit from higher purity, lower costs, and potentially better long-term returns. Aim to keep gold at around 5–15% of your total investments, and pick the format that best aligns with your comfort level, investment duration, and tax needs.
