How to Invest in Gold ??. Physical Gold
Tags: Gold Investment, Investment, Investment Management, Gold

Gold in the form of jewelry is not only used as a wearable but also helps to get over financial crisis. So, buying gold has traditionally been a financial support system over the years.

There are ways of owning gold — paper and physical.

Physical

Physical Gold

Paper

Gold ETF’s

Sovereign Gold Bond

Digital Gold (Later can be made as Physical when redeeming)

Physical Gold

Physical gold can be bought in the form of jewelry, gold biscuits or gold coins from a certified jewelry shops or online. Bank locker is required to store it safely.

Gold ETF

Gold ETF is an investment that holds gold as an asset. Gold ETF’s are similar like stocks which can be traded in the cash market NSE. This can be bought and sold at current market price.

For buying and selling gold ETF’s, only a Demat account is required and have an asset management company to buy and sell them on stock exchange online.

Sovereign Gold Bond (SGB)

SGB’s are the Gold bonds provided by Government of India. Their value is denominated in multiples of gold grams.

Bonds are sold through offices or branches of Nationalized Banks, Scheduled Private Banks, Scheduled Foreign Banks, designated Post Offices, Stock Holding Corporation of India Ltd. (SHCIL) and the authorized stock exchanges either directly or through their agents.

A customer can apply online through the website of the listed scheduled commercial banks. The issue price of the Gold Bonds will be ₹ 50 per gram less than the nominal value to those investors applying online and the payment against the application is made through digital mode.

Investors are assured of the market value of gold at the time of maturity and periodical interest of 2.5% per annum.

Digital Gold

Digital gold is for those who want to invest in gold but does not wish to possess physical gold.

Digital gold is issued by the state-owned MMTC (Metals and Minerals Trading Corporation of India), which is associated with PAMP (Produits Artistiques Métaux Précieux), Switzerland, who is a global leader in branding bullion. By investing in digital gold, you purchase 24K 99.9% pure gold digitally.

When you place an order for digital gold with your agent, they buy the corresponding amount of gold and place it in a vault on your behalf. Likewise, when you wish to sell your digital gold holdings, the agent will sell the gold at the prevailing market price and deposit the amount to your account. To avoid making your account inactive, you are required to do one transaction in at least every six months.

So SGB or ETF or Physical Gold or Digital Gold?

Initial Cost

To buy SGB you have to pay a broker charge of 0.01% or Rs.20 whichever is lower, whereas buying Physical gold costs 3% GST + making charges around 3 to 5%.At the same time, Fund managing charge of 1% per year is applicable for Gold ETF.

In case of digital gold you need to pay 3% GST like physical gold. These are charged as follows: No charges for the first two years. If the amount of gold is less than 2 grams at the end of two years from the date of your first purchase, then a fee of 0.05 per cent per month is charged. Delivery charges and making charges applied in when the paper gold is converted into physical.

Liquidity

Physical gold can be sold at anytime with reference to the market price. whereas SGB’s can be redeemed only after 5 years of locking period noted that maturity is 8 years. SGB’s can also be sold in secondary market like NSE but it’s always not sure the buyers would buy on the current market price.

Gold ETF’s can be sold at anytime on the stock exchange on the current market price. Digital gold on any given day, the selling price is lower than buying price because there are certain costs which include taxes and bank charges.

Long Term Capital Gain

Capital Gains in SGB on redemption are tax-exempt if its held till maturity period. Whereas gains in Physical gold, Gold ETFs and digital gold are subject to flat 20% tax if it is redeemed after 3 years. Earlier than 3 years redemption would be added in total income and the individual’s tax slab applies.

Security

Security can be explained in two terms. one is storage and the other is purity. Storage wise paper gold’s like SGB, Gold ETF and Digital gold’s are always best as there is no chance of theft, wear and tear like physical gold.

Purity comes in picture with physical gold and Digital gold. Digital gold 24k is 999.99% purity and Physical gold depends on the jewelry shop. It is always advised to check BIS hallmark symbol on the gold.

which is best mode to invest in Gold??

Comparison between modes of gold investment

Finally it depends on the reason for investing on Gold?

If the purpose of buying gold is daughter’s marriage (After 5 years), it is better to go for SGB. If it is looked as an Investment option, then ETF would be the better mode to liquidize anytime.

Happy Investing!!!