Gold price @ Rs 60,000: Did you miss the bus? Five ways to invest in non-physical yellow metal next time

Gold futures scaled the Rs 60,000 per 10 grams mark for the first time ever on March 20, 2023, taking its year-to-date gain to four per cent. Traditionally considered a conservative yet effective way of beating inflation, gold can be used as an investment in non-physical form. This way, the buyer gets the maximum bang for the buck. Digital gold, for instance, enables a buyer to concentrate the funds on the gold price without bearing the making charges. 

Here are five different ways to invest in non-physical gold:

1.       Digital gold

Some banks, fintech platforms, and major jewelry companies allow investors to trade digital gold. Investing in digital gold is as good as investing in physical gold. It allows the investors to buy an amount of gold online but eliminates the need to physically store it.  The gold purchased as a digital commodity will be stored in insured vaults by the seller on behalf of the customer.

The only disadvantage of investing in gold is that it does not come under the regulations of capital market regulator Securities and Exchange Board of India (Sebi).

2.       Gold  ETF

Investing in gold ETFs, on stock exchanges, is equivalent to investing in gold of 99.5 per cent purity. But unlike physical gold, whose price varies across states due to local taxes, gold ETFs reflect the current gold prices. Investors can invest in gold ETFs through their demat accounts.   

The majority of your investment goes into physical gold and the remainder into debt Instruments.

3.       Sovereign gold bonds

Sovereign gold bonds or SGBs are government securities denominated in grams of gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The gold bonds are issued by RBI on behalf of the Government of India. Introduced in 2015, sovereign gold bonds have a term of eight years with a lock-in period of five years. 

The current interest rate for SGB is 2.50 per cent  per annum on your initial investment. It is paid twice a year (semi-annually) for 8 years, i.e. till maturity. Interest will be credited directly to your account, which you shared while investing. Returns are usually linked to the current market price of gold.

4.       Gold mutual funds

Also known as gold-saving funds, these are mutual funds that invest in gold ETFs. But unlike ETFs, investors do not need a demat account to be able to invest in gold fund of funds. In gold savings funds, an investor invests the majority of its corpus (90-100 per cent) in gold ETFs whereas a smaller portion may be in money market instruments or some short-term debt products.

5.       Gold derivatives

Gold futures and options derivates contracts are available on MCX. There are two classes of gold derivatives commonly dealt with, forwards and futures as well as options in both categories. The forward contracts are bilateral bespoke agreements, while future contracts are standardized and traded on registered exchanges.

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