Gold prices have touched record highs this year due to concerns over Covid-19 pandemic, simmering US-China tensions and decline in the US dollar. The surge in gold prices is also attributable to the fact that the precious metal is seen as a safe haven during geo-political upheavals and a currency of last resort. And with uncertainties set to linger, this may be as good a time as any to invest in the precious metal. There are many ways of investing in gold, from buying physical gold and e-gold to investing in gold mutual funds and bonds.
Gold jewellery has been purchased for personal consumption since ages. It is also a good investment product by itself. Gold can be bought either in the form of gold jewellery, gold bars or coins. Gold bars and coins are, in fact, more profitable investments than jewellery. They are made of pure gold and do not carry any making charges. Gold coins and bars are available at any designated outlets of Metals and Minerals Trading Corporation of India, and at select bank branches and post offices.
E-gold was introduced in India by National Spot Exchange Limited to enable investors to park their funds into gold in smaller denominations and hold it in a demat (dematerialised) form. To purchase e-gold, a person needs to open a demat account with an authorised broker. The gold held in the demat account can be transacted, just like shares.
Gold ETFs are exchange-traded funds that invest in physical gold. Just like stocks, gold ETFs are listed and can be traded on the stock exchanges on a regular basis, ensuring adequate liquidity and ease of investment. ETFs invest around 90 per cent of their corpus into physical gold and the rest into debt instruments. One would need a demat account and trading account to invest in gold ETFs.
Gold funds are mutual funds investing in the shares of companies connected with the gold business. They have a diversified portfolio, investing in a gamut of companies, rather than putting all eggs in one basket. Gold mutual funds are therefore ideal for investors who tend to shun risk.