Apr 27, 2012 05:58 PM IST | Source:

This Akshaya Tritiya - Best way to invest in Gold

Akshaya Tritiya is supposed to be one of the most auspicious days to buy gold as per Indian belief. But before buying, lets take a look at the pros and cons of the most attractive gold investment options available in the Indian market.

Akshaya Tritiya is considered as one of the most auspicious day to buy gold. According to Indian belief, this day is blessed by the goddess of wealth and investment on this day is likely to grow throughout the year. Jewelers and gold traders wait for this day to push up sales.

In order to attract more buyers, the jewelers and banking institutions have come up with various schemes this year. One of the leading jewelers has come up with an offer of a free silver coin equal to half the weight of gold purchased i.e. if someone buys 100 grams gold, then he will get 50 grams silver free. Another renowned jeweler is offering up to 50% discount on the making charge of jewelry. Similarly, banks are also offering attractive discounts on the gold coins if booked on or before Akshaya Tritiya.

There are many options available in the market, and it's natural for the buyers to get confused. The buyers have a wide range of options to buy Gold on this Akshaya Tritiya. Before buying, it is necessary to understand whether one is purchasing for investment or as jewellery. Following are some of the most attractive gold investment options available in the Indian market:

a. Gold Jewelry
b. Gold Bar/coins
c. E-Gold investment
d. Exchange Traded Fund (Gold ETF)

The details of all the four options are shown in the table below:

Details Gold JewelryGold Bar/coinE-Gold (NSEL)Exchange Traded Fund (ETF)- Gold
Purity Offered In Various Products9 carat to 24 carat999.9% (24 carat)995.0%(24 carat)995.0% (24 carat)
Chances of ImpurityYesNot PossibleNot PossibleNot Possible
Additional Cost of PurchasePrevailing Market price of the Gold & Making charges in the range of 1% to 10% on the basis of design and work.1) Prevailing Market price of the Gold 2) VAT at 1% 3) Premium charged by the bank/seller at varied rates1) Real time Gold Price on trading screen  2) Brokerage at the rate of 0.1% to 0.5% 3) Transaction charge                                     1) Real time Gold Price  2) Brokerage at the rate of 0.1% to .5 %depending upon the Broker       
Holding chargesNIL if kept at home or if kept in bank locker then charges for locker in the range of Rs 1000 to Rs 2500 Pa.NIL if kept at home or if kept in bank locker then charges for locker in the range of Rs 1000 to Rs 2500 Pa.Annual maintenance charges which range from Rs.150 to 4001) DEMAT Charges of Rs 150-250 pa. 2) ETF fund manager's annual maintenance charge
Where to buy?From any jeweler1) Banks 2) Post office 3) Jewelers                  From Trading platform of National Spot Exchange Limited (NSEL)Stock exchanges i.e NSE and BSE
Any Requirement Before BuyingJust need Money in cash or chequePan card for purchase above Rs. 50,000.DEMAT with trading account in NSEL at any broker.DEMAT and Trading Account with a broker along with sufficient fund to buy
Minimum unit that can be Purchased1 Gram0.5 Gram to 1 kg1 Gram1 Gram
Tax on transactionVATVAT at the rate of 1%Transaction charge at Rs.1/gmOnly brokerage without STT
How to LiquidateBack to JewelersBanks don’t buy-back, can sell only to jewelersCan sell back at NSEL trading platform or if delivery taken then sell it to the jewelersStock Exchanges
Selling ExpensesIf not 24 carat and not hallmarked then impurity will be deducted along with making chargesPremium paid to the bank while buying gold cannot be recoveredIf delivery taken then 1% VAT and 1% as Making charges of Gold coin.Brokerage
RiskTheft and impurityTheftMinimum riskBrokers Fraud
LiquidityModerate as jewelers buy at discount price on the prevailing market rateLow as Bankers doesn’t buy and Jewelers also pay lessVery High LiquidityHigh Liquidity
Wealth taxYesYesYesNo
Short term capital gain taxFirst 3 yearsFirst 3 yearsFirst 3 yearsIf sold before one year after purchase 
Long term capital gain taxAfter 3 yearsAfter 3 yearsAfter 3 yearsAfter One year
As an InvestmentNoYesYesYes

















































Now after analyzing all the data under the four options to invest in gold, it would be a better choice for a buyer to first analyse his/her need. If the buyer wants to invest for long term with less carrying cost and doesn't want many tax obligations, then Gold ETF is the best choice. Even when the buyer wants to make jewelry in the future with the invested gold, it is best to invest in the electronic form of gold because later on when needed it can be easily liquidated, and proceedings can be used to make gold jewelry at the prevailing market price. If, however, the buyer immediately wants to use gold as jewelry, then obviously there is no point in buying gold in an electronic form. Usually during Akshay Tritya people try to invest in gold as a long term asset, so perhaps the best way to do this is to invest in the electronic form of gold.

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