India is the second-biggest gold market after China. The demand for gold in India peaks around the festive season in the October-November period, when Navaratri, Durga Puja, Diwali, Dhanteras and Bhai Dooj spirits fire up consumption.
However, in modern times financial prudence has come to increasingly attack the concept of investing in gold jewellery, which financial advisors regard a sheer wastage of money. Why, and what can be the alternatives? Let’s delve deep.
Jewellery is poor investment
“Every piece of jewellery carries a making charge and it can range up to 25-30%. If you buy a piece of jewellery and later, when you go to sell it, no buyer will first deduct the making charge and would pay only for the price of the quantity of metal. Thereby, you stand to lose much of your investment,” warns Prasunjit Mukherjee, CEO, Plexus Management Services. Moreover, jewellery gives one collateral headaches – storage and safe-keeping.
In sharp contrast, gold in “demat” form entails no such loss on investments as well as no collateral worries. What we mean by gold in demat form is that it is essentially an investment linked to gold that is dematerialised. These are gold ETFs (exchange traded funds), gold mutual funds and digital gold.
Gold ETF
If one invests in gold ETFs one has to have a demat account. Gold ETFs directly invest in gold. These are completely liquid, convenient and inexpensive. The minimum investment is the price of 1 gram of gold, which varies with time. ETFs are available with the biggest of brands such as HDFC, Aditya Birla Sun Life, SBI, Axis, Kotak, Invesco, Nippon and ICICI Prudential. The net AUM in gold ETFs was Rs 37,390 crore in August 2024.
Gold coins, bars
Coins are bars are sold by banks, NBFCs and even established jewellers. These are hallmarked in accordance with BIS guidelines. These coins are available in different masses between 0.5 and 50 grams. Jewellers say that these come in very high purity and are encased in tamper-proof packaging.
Digital gold
Digital gold in another instrument to invest though there is lack of clarity on regulations in this area. The common man can use Paytm, PhonePe, and Google Pay to buy digital gold. The advantage here is that one can invest in multiples of Re 1, irrespective of the price of gold in the market.
In India the demand for gold goes up in the festive season in October-November since buying it is considered auspicious. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
