Apr 18, 2018 10:19 AM IST | Source:

Sovereign Gold Bonds vs physical gold vs gold ETFs: What should you buy this Akshaya Tritiya?

In this article, we take a look at various gold investment options to make the right choice in the festive season.

Adhil Shetty

Gold has been a preferred investment option for many during the auspicious occasion of Akshaya Tritiya irrespective of its price. Despite the soaring prices, the yellow metal would not lose its sheen owing to wedding season. Gold is believed to be one of the best hedge against inflation and is considered to be amongst best performing asset when the market is full of risk and uncertainty.

If you are planning to buy gold this Akshaya Tritiya, then you should invest in the yellow metal as per your financial goals, and select the right option based on the return aspect, liquidity, tax efficiency, etc. of each.

In this article, we take a look at various gold investment options to make the right choice in the festive season.

Physical Gold

Buying physical gold is one of the easiest ways to invest in the yellow metal. However, you should be cautious while investing in jewellery as its resale value is comparatively lower than gold biscuits and coins. You should also remember that you may need to pay a premium over the prevailing market rate for buying physical gold and when you want to sell it, you may be offered lower rate than the prevailing market rate. Also, physical gold is not safe as there is a risk of theft when you keep it at home. Purity is another big issue with the gold being sold in the market so go only for hallmark certified gold and look for a hallmark stamp of the Bureau of Indian Standards (BIS). You can restrict you investment in physical gold to a smaller quantity for the auspicious factor this Akshaya Tritiya and can explore other investment option with better benefits.

Gold ETF

Gold ETF are traded on the stock market and you can buy or sell gold in real time during the trading session. You can buy 1 gram of gold to initiate the investment. All your gold ETF investment will safely get deposited in your demat account. You need to pay annual demat charges for holding scrips in it. Transaction charges on buying and selling gold ETF is much lower than what you need to pay in case of physical gold.

You do not get delivery in the form of physical gold when you buy gold ETF. In future if you wish to buy physical gold, then you can liquidate your position in gold ETF and use the released funds to buy the yellow metal from the market. It is very safe to hold, liquidity is high and easy to transact in comparison to physical gold.

Sovereign Gold Bond (SGB)

SGB is a new age gold investment product, introduced by the government as an alternative to physical gold. The gold bonds for investment are available at select post office, designated banks and through stock exchanges. You can keep the investment either in demat form or the paper form. The most lucrative advantage of investing in SGB is that apart from capital gain benefit, you are also entitled to interest on invested amount at the rate of 2.5% p.a. Another important benefit of investing in gold ETF is that if you redeem gold after completion of tenure i.e. 8 years, then the complete long-term capital gain is tax free. You are also allowed to raise loan against SGB by putting it as collateral security.

The table below compares all the gold investment option on important aspects. If you are looking to invest for a very long term, then SGB is a good option because you get tax benefit as well as interest income comes as a surplus advantage. For short to medium term investment, ETF could be a good option. If you are looking to use the gold in form of jewellery or planning to buy gold for marriage etc., then physical gold is a better choice.

Gold Investment Prospect Comparison


Price of gold largely depends on the international economic situation. In the medium to long term, the price of gold is expected to rise on the back of trade war between the US and China, Syrian crisis, crude prices on a rise and chances of high inflation due to global warming that can result in food and water crisis in the long term. So, even if you are accumulating gold for festive reasons, it may not upset you in the long term!

The writer is CEO of Bankbazaar

tags #investing

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