Should you still buy physical gold or invest in paper gold this festive season

Festive and wedding season is right around the corner. Hence, as an Indian you will head towards buying gold jewelry.

It is considered auspicious to buy yellow metal. Apart from that, people generally buy it as a saving which can be used at any point of emergency. 

But, now the question is should you still follow the tradition of buying physical gold or move ahead?

Look at this point. There are always associated costs when it comes to gold jewelry. These include making charges, wastage, and add up to the cost which are not recoverable while liquidating the jewelry.

Calling investment in gold as a"BIG NO NO", Ajit Narasimhan, Category Head - Savings And Investments, Bankbazaar.com, said, "It may not be very easy to sell jewelry for cash. In addition, gold itself is an unproductive asset. Its value increases entirely on the belief that someone else will pay more for it eventually."

So, where to go next?

Last year during festive season, a trend was seen where Indians were not only looking at buying physical gold as an option. With the change in thinking and growing awareness, people were exploring new ways of buying gold like paper gold.

Sovereign Gold Bonds and gold Exchange Traded Funds (ETFs) are examples of paper gold. 

In fact, the government last year had launched Sovereign Gold Bonds which could still be considered as an investment option as it comes with number of advantages, if you are looking to stay invested for eight years or more.

These bonds are issued periodically, and their value increases exactly with gold. They also provide an extra interest of 2.5% per year, Narasimhan said.

Moreover, apart from SGBs, there are many Mutual Fund houses closely track the value of gold and have goldbacked mutual funds. 

But, unlike gold mutual funds, the gains from the gold bonds are tax-free. This makes it very similar to holding physical gold with a 2.5% a year bonus.

Hence, this festive season do consider other gold options rather than just investing in physical gold.