How to invest in Gold in India : 5 different ways

(Last Updated On: May 7, 2017)

Gold Investment in India

Whether you are a young 25-year-old bride or 40-year-old married women or a young businessman in a small town in India, one way for you to show off your prosperity is wearing gold jewellery or ornaments. In fact, Gold is a favourite of not only black money holders but also of most of Indian Gods in equal measure. We look at various ways on how to invest in gold in India.

According to data released in early 2016, India continues to be the largest consumer of gold in the world with an annual consumption of approximately 700 tonnes which is more than 1/3rd of global Gold consumption

In a recent study by Karvy on the profile of personal investments of Indians, Gold continues to be the dominant mode of investments for Indians. I have summarised the results below

Indias savings split

Indias Savings-1

Clearly Gold is the biggest asset Indians invest in by far.

If you want to invest in gold is buying gold or metals only way or there are other options,I will   be explaining few options in a while before that let me spend some time on answering the question

Why Indian invest so much in  Gold

  • Cultural Reasons: Historically Indians have invested in gold and land ( real estate) as their primary household savings. Gold apart from monetary value has a prestige value and show off value for many households, for some folks at bottom pf pyramid banking services haven’t reached them and they normally end up saving in form of gold
  • Gold black money conduit: Lot of trade in smaller cities in India happens with cash, and gold and cash are easily tradeable outside regular banking system which helps people circulate lot of black money through gold investments
  • Gold a secure Investment : Due to under penetration of non-debt financial instruments in Indian market, Gold is one investment which is considered secure and return worthy.
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    5 Alternative Methods to Invest in Gold in India

  1.  Investing in Gold ETFs

Gold ETFs  are a non-physical way of investing in gold, so you do not buy physical gold by but buy a gold backed Exchange Traded Fund(ETF) whose price moves according to the price of gold. So investing in gold ETFs is akin to investing in gold just that you don’t get to keep the yellow metal it is in a Demat form. Gold ETFs are freely traded in the market. These ETFs are managed by professional fund managers and as such, they entail a management cost as well as brokerage cost which reduces your gains vis a vis physical gold.

 2. Investing in e-gold

e-gold is an electronic way to have a gold holding. In simple terms you buy gold but it’s kept in a Demat form and you can exchange the Demat certificate for gold at any time. Currently National Spot Exchange Limited in India offers e-gold. You can sell e-gold as well as take physical delivery of gold, e-gold generally gives better returns then ETFs in the longer term as there are no annual management fees as in the case of ETFs.

3. Gold Mutual Funds

Gold mutual funds let you take exposure in securities or shares of companies who are in the business of mining and production of gold. Gold mutual funds and Gold ETFs can have different returns as mining and production business performance may not exactly map to gold prices

4 Gold Fund of Funds

Gold fund of funds basically invests in  multiple ETFs. You can then buy theses funds and indirectly invest in Gold ETFs. In this way, you do not need to maintain a Demat account to invest in ETFs. you would need to pay some management fee to the fund manager. You can invest in one shot or use trusted SIP way of investing like other mutual funds.

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5. Gold coins or Bars

If you are really fond of keeping physical gold you can also invest in gold coins or bars you can buy gold coins or bars from banks or from your local jeweller. Banks normally sell gold coin at a premium ( in most cases 5-7%) and they do not buy back coins or bars so buying from banks can be little tricky because when you need to sell it you will have to go to a jeweller, who prefer buying something from a fellow jeweller because of how gold trade is structured in India.

How have you been investing in Gold ? Do drop your comments and reviews .. 🙂

2 Comments

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  • Bitcoin is the next Gold. Move over the traditional methods or repent later.

    Crypto 2 months ago Reply


  • Thanks for this great article. Your analysis and explanation about the share that you suggest were really helpful which gives a great idea of gold investment, really like that.

    Narnolia Securities Ltd 3 months ago Reply


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