Gold price by Investorocean.com
Gold ETF vs Sovereign Gold Bonds
Lately, two gold investment in paper form with actual gold as the underlying asset have emerged as a popular option that are Gold ETFs and the Sovereign Gold Bond (SGB).
Gold as Exchange Traded Funds (ETFs) Passive investment instruments that invest in physical gold and thus are predicated on price of gold. Gold ETFs are listed on the Indian Exchange as other stocks or equities and track gold prices and can be purchased through your trading or mutual fund account. ETFs are a fantastic alternative if you want to invest for the short term or in monthly instalments like a SIP.
Indian Government also issues bonds through the Reserve Bank of India called Sovereign gold bonds, or SBGs. These gold bonds are sold as as unit in which each unit is valued at one gram of gold with purity of 99.9 percent. Since SGBs are government-issued securities that are a sought after and a safer investment in gold. Their worth is measured in multiples of gold grams. SGBs have seen a large growth in investors, as they are seen as a viable alternative to actual gold. However, SGBs has a lesser liquidity than other gold investment in the market. If SGBs are left to mature i.e., for a period of 8 years and then retained, the gains are not subjected to tax. However, if the returns after maturity is sold off then it is treated as capital gains and is hence taxable.
Buying Gold Bars
Gold bars or gold biscuits are rectangular pieces of gold that are particularly popular as an investment option. When planning to invest in gold, a gold bar is a much practical option simply because of its cost effectiveness. The difference in price for a jewellery and a gold bar is substantial and could be nearly 2% of the total cost. While buying gold bars there are few things that should be kept in mind such as the purity and reliability of the seller or manufacturer.
Gold bars usually have the mark of purity, which is usually 999.9 and comes in different weights. Investing in a gold bar makes sense because bars have a smaller premium associated to them. Making charges are normally included in the premium, although shipping and refining fees are occasionally included as well. Larger bars are less expensive to buy, while smaller bars are simpler to sell on short notice. Always make sure that when you buy a gold bar, the bar is hallmarked i.e., certified for its purity, so that your investment is insured.
Purchasing Gold ETFs Vs Gold coins Vs Gold Jewellery
Gold investments are fruitful, and these days there are several forms of gold investments available for you. Each gold investments has its own advantages and drawbacks, and each is suitable for a certain investment plan. You can purchase Gold ETFs, Gold Coins and Gold Jewellery as an investment.
Gold ETFs are digital gold and is generally traded in the Exchanges like stock, they can be acquired easily with Demat Account or through mutual funds, while gold coins and gold jewellery can be bought through any manufacturer or jewellers, these days they are also available on online platforms as well.
Gold ETFs are generally evaluated as one gram of gold of highest purity i.e., 99.9% gold, but a intrinsically designed gold jewellery can only be 22 carat (92% gold) or lesser because a 24 carat gold is difficult to mould and is fragile. Gold coins can be available in a variety of sizes and weight and can be 99.9% hallmarked.
Gold coins are usually cheaper than Gold ETFs or Gold Jewellery because gold coins price do not include making charges or brokerages, which is included in Gold ETFs or Gold jewelleries, respectively.
Gold ETFs, coins and jewellery, which are held for a period of less than 3 years, are subject to tax as per the income tax slab rates. For investment held for a longer period the gains from such investment is taxable at 20% for gold coins and jewellery, and for ETFs the gains are taxable at 20.8%.
Purchasing eGold advantages of digital gold
In addition to Gold ETFs, gold jewellery, bars or coins lately there is another gold investment option that has grown in acceptance amongst investors. E Gold or digital gold is an investment on gold where the investor can purchase gold in smaller quantities and that gold unit is credited in the Demat account of the investor.
There are several advantage of investing in digital gold, such as:
- The investment digital gold does not have a lower limit, you can invest with a small amount starting from Rs. 1;
- As opposed to the physical gold, you can be assured for the quality or the purity of E Gold. It is insured in an digital gold investment;
- If and when you are applying for an emergency bank loan, the E Gold value is actually useful, since they can be used as collateral for loans;
- Physical gold requires you to be prepared safety measures, in E gold investment, since the gold itself is not physically present, it is very safe. It is the responsibility of the seller to hold and keep the gold safe for you.
- You can exchange the value of E Gold for physical gold, delivered at your doors or for cash.
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