‘65% of millennials prefer digital gold…’: From ETFs to mutual funds, what are the various ways to invest in the yellow metal?

The Indian affinity for gold shows no signs of abating. While traditional jewellery still holds emotional and cultural value, modern investors are exploring smarter, tax-efficient formats. "Indian households (especially women) own an estimated 24,000 tonnes of gold jewellery, exceeding the combined official reserves of the U.S., Germany, Italy, France, and Russia. This stockpile equals nearly 40% of the country’s GDP, showing how deeply gold is embedded in culture and wealth," said Jayatu Sen Chaudhury, professor-finance & analytics, Great Lakes Institute of Management.

"India’s gold demand rose 5% in 2024 to 802.8 tonnes, with 563.4 tonnes coming from jewellery. But today’s investors, particularly millennials, are shifting from physical to digital formats. Over 65% of millennials prefer digital gold, citing better returns, flexibility, and ease of access," he added.

One tax rule for all forms

Regardless of the form of jewellery, ETFs, digital gold or mutual funds, gold in India is taxed uniformly. Gains on sales within 24 months are taxed as per the individual’s income slab. If held for more than 24 months, they qualify as long-term capital gains (LTCG) and are taxed at 12.5%, with no indexation benefits. Additionally, during tax assessments, jewellery up to 500 grams for married women, 250 grams for unmarried women, and 100 grams for men is not questioned, even without proof of purchase.

From digital gold to ETFs and mutual funds, here are the various ways to own gold in today’s financial world:

Jewellery: Emotion over efficiency

Gold jewellery, which is used in weddings, festivals or passed down through generations, remains deeply tied to Indian tradition. Yet as an investment, it lags. Making charges (10-25%) and resale markdowns (5-10%) reduce actual value. Net annual returns average around 6.5%, lower than other formats. Despite its emotional appeal, jewellery is financially inefficient and difficult to document for taxation and valuation.

Gold ETFs: Returns with liquidity

Gold Exchange-Traded Funds (ETFs) provide clean exposure to gold, each unit typically representing 1 gram stored in secure vaults. ETFs are traded like stocks, have low expense ratios (0.3%-1%), and offer high liquidity and transparency.

Over the past decade, gold ETFs in India have delivered annualised returns of around 11.4%. Leading ETFs such as Kotak Gold ETF, Nippon India ETF Gold Bees, and HDFC Gold ETF have consistently outperformed jewellery in both returns and convenience. With clear audit trails, ETFs simplify tax reporting under the LTCG regime.

Digital gold: For the everyday investor

Digital gold allows fractional investment, starting as low as ₹1, via mobile apps. The gold is physically stored and insured, with options to redeem as cash or take delivery.

"This format appeals especially to young and first-time investors. Leading platforms such as Paytm, Google Pay (with MMTC-PAMP), and Groww dominate the space. While platform fees (1-2%) slightly reduce returns, digital gold still offers 8-9% annualised returns, better than jewellery and nearly at par with ETFs for small-ticket investors. The ease of buying, selling, and record-keeping makes it tax-compliant and accessible, particularly in semi-urban and rural areas," said Chaudhury.

Gold mutual funds

Gold mutual funds invest in a basket of ETFs or gold-linked assets and don’t require a demat account. They are ideal for investors looking for managed exposure without the need to track prices daily. "Top funds like HDFC Gold Fund and Axis Gold Fund have offered annualised returns of 11-12% over the past five to 10 years. Though expense ratios are slightly higher than direct ETFs, they offer ease and professional management. Taxation is the same: 12.5% LTCG after two years," said Chaudhury.

Opting for the right format

Jewellery still dominates traditional investing and gifting. ETFs offer the best blend of performance, liquidity, and compliance. Digital gold is user-friendly and great for new investors. Mutual funds serve those seeking gold exposure with minimal intervention.

The gold narrative is transforming, from heirlooms to apps, from lockers to liquid funds. The emotional connection to gold remains, but its form is becoming smarter, cleaner, and better aligned with financial goals.