Gold is not only worn as jewellery but also works as a way to tide over financial emergencies, so buying gold has been a financial support system over the years. There are physical, paper and digital ways of owning gold. Some of the ways to invest in gold are discussed below.
- Gold bullion: gold bullion is any form of pure or nearly pure gold that has been certified for its weight and purity, including coins and bars of any size. It is not considered an ideal investment because of making charges, storage costs and purity concerns.
- Gold jewellery: many Indians invest in gold this way, but often fail to see why gold jewellery is ideal for wearing but not as an investment.
- Gold ETFs (exchange-traded funds): a gold ETF aims to track the domestic price of physical gold. Gold ETFs are passive investments based on gold prices that invest in gold bullion; their units represent physical gold, in paper or dematerialised form.
- Sovereign Gold Bonds (SGBs): SGBs are government securities denominated in grams of gold, and a substitute for holding physical gold. Investors pay the issue price in cash, and the bonds are redeemed in cash on maturity. They are issued by the Reserve Bank on behalf of the Government of India, and pay interest at a fixed rate of 2.50% a year on the amount initially invested.
- Gold mutual funds: gold mutual funds invest directly or indirectly in gold reserves: in physical gold, or in the shares of gold mining, producing and distributing companies. They are a convenient way to invest in gold without buying it in physical form.