Last Updated on Jan 5, 2023 by
Let us begin with a few interesting data points:
- Of the nine largest stock market crashes since 1976, the market prices dropped 30.4% on average, while gold increased 6.1% on average during the same period (Source – gold silver analysis).
- In 2010, the price of gold was Rs. 18,500 for 10 gms, and in 2020, it went up to Rs. 48,650.
- In 2022, gold returns beat Sensex and most debt mutual funds.
By now, you’d have understood that gold is a good investment product. Historically, the precious metal has given a 10-11% annual return. Experts predict that gold will touch Rs. 62,000 in 2023.
Today, there are multiple gold investment options in the Indian market, and with so many options available, it can be tough to decide the best option. That’s where this blog comes in. We’ll take you through some good gold investment options in India, such as digital gold, gold ETFs and mutual funds, gold SGB (Sovereign Gold Bond) and gold leasing.
Table of Contents
Different gold investment options available in India
1. Digital gold
Digital gold is a convenient way of buying 24K Gold without having to store it physically. When you buy digital gold, an equivalent amount of physical gold is stored in secured vaults. Hence, the users do not have to worry about storage and security. In recent times, digital gold has
become popular because the price starts at just Re. 1. You could withdraw digital gold as cash or the physical metal itself. You could use apps such as Paytm, PhonePe or Gullak to invest in digital gold.
2. Sovereign Gold Bonds (SGB)
These are gold bonds issued by the RBI a few times yearly. These bonds are denominated in Gold Gms and give an additional 2.5% fixed interest (simple interest) on top of gold price appreciation. The interest on the principal investment is credited annually. They come with a long lock-in period of 8 yrs and also can be sold in the secondary market at a discounted price, which is usually 7- 8% lesser than the market price. But SGBs are tax-free only if left for 8 yrs. However, the extra 2.5% would be taxable irrespective of the time period. These can be bought and sold in INR only.
3. Gold ETFs
These are Exchange Traded Funds (ETFs). They are passive investment instruments that are based on gold prices and invest in gold bullion. Buying Gold ETFs means you are purchasing gold in an electronic form. You can buy and sell gold ETFs just as you trade in stocks. When you actually redeem Gold ETF, you don’t get physical gold but receive the cash equivalent. One would require a Demat account to invest in them.
4. Gold leasing
Gold leasing is the latest investment option that gives you an additional 5% return per annum on top of gold appreciation (~11%), making it an asset that offers up to 16% returns. The interesting part about gold leasing is that the extra returns are given in the form of gold but not cash. The interest is compounded, which you may not get in any other option.
Here, you lease your digital gold to jewellers (lessee) who will thereon utilise this gold for their working capital. When you unlease, the lessee will return your gold (principal) along with a lease rental payment (OR) extra returns that you have earnt till that day. In concept, this is not very different from you owning an asset like a house and renting it out to another user who pays a rental for using your asset.
The practice of gold leasing has existed in the offline market for some time but was only available to the ultra-rich, as the minimum investment required was multiple kilograms of gold. Also, these weren’t secured, and the security depended on your relationship with the jeweller, but now this practice is being secured using bank guarantees. One platform that allows gold leasing in India is Gullak.
Gullak: India’s Savings App has launched Gold+, making gold leasing accessible for every Indian. They claim to be democratising and digitising gold leasing so every Indian can benefit from the extra returns on gold.
Benefits of gold leasing
- Attractive returns: Financial institutions are offering attractive returns on gold leasing. Gullak’s Gold+ allows users to earn an assured extra 5% grams of gold every year from their digital gold savings on top of historical average gold returns of 11%. This makes Gold+ an asset that offers up to 16% returns.
- High flexibility: Some financial institutions allow gold leasing with as low as 1 gm. Some don’t even have lock-in periods. Hence investors can unlease and withdraw their investments anytime they want as cash or gold.
- Secured with Bank Guarantees: The Gold leasing app verifies all the jewellers and ensures that only the reputed are onboarded. These jewellers must also provide a 100% bank guarantee on the leased gold. This makes gold leasing fairly safe.
There are plenty of options for investing in gold in India, whether you’re a seasoned investor or just starting out. Gold prices are expected to touch an all-time high by the end of 2023, and now might be a great time to invest and get good returns. And if you are looking for high and stable returns, gold and gold leasing might be the way to go. Happy investing!
Disclaimer: These are author’s personal views, please do your own research before investing.