Which is the Better Form of Investment in Gold – Physical or Electronic?

Gold, the yellow metal has greater importance owing to cultural and social reasons in India. Since many decades, the word gold goes hand in hand with status, wealth, protection and security. In India, most of the traditional families even today have the habit of purchasing gold on various festivals and special occasions be it a birthday, wedding anniversary, marriage, childbirth, Akshaya Tritiya, Dhantera, Deepavali, Betrothal Ceremony and the list goes on. In addition to this gifting of gold within the family members still prevails in the country and hence most of the Indian families will acquire or invest a chunk of their savings in the purchase of gold or gold ornaments.

Today gold is just not limited to buy jewellery or ornaments (physical form), it has created a niche for itself and has grown into much different preference. People in India can now invest in the yellow metal either through any of the following means be it gold ETFs, gold in electronic form, gold mutual funds, gold-related schemes, gold bullion.

As gold acts as a good hedge, its impact on the economy of a nation wanes and waxes depending on the performance of other forms of investment. At a time when other investments look risks, investors seek refuge in gold which is touted as a safe-haven asset. The price of gold will determine the health of the economy. Any kind of geopolitical and economic uncertain situation across the globe will also impact the gold prices daily.

The prices of the yellow metal have witnessed a phenomenal growth in the last few years as the recently concluded trade war between the U.S. and China helped the gold to gain over 18% alone during the year 2019, its best performance so far since 2001 financial crisis.

Advantages of Investment in Gold

• Gold acts as an ideal hedge for tackling financial market risks
• Demand for gold is strong globally
• Highly liquid asset
• Diversification with gold balances inflation
• Get tax benefits

Disadvantages of Investment in Gold

• Difficult to store physical gold
• Gold does not fetch yield on investment
• Volatile nature of gold makes it difficult to determine its future price
• Investment in Gold ETFs will include brokerage fee
• Purchase price of gold jewellery includes making charges, wastage and design charges
• Buying a large amount of bullion will attract storage fees.

Let's know in detail about the different forms of gold investments available in India.

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