Is gold still the safest bet? Here’s how to make the right investment choice

Gold has long been a preferred investment in India, offering stability during economic uncertainty. While traditional buyers prefer physical gold, modern investors have multiple options to gain exposure to the precious metal. From digital avenues to market-linked instruments, here’s a look at the various ways one can invest in gold today.

Mayank Bhatnagar, co-founder and COO at FinEdge said, “Gold investment options vary based on risk and return. Sovereign Gold Bonds (SGBs) offer fixed interest and capital appreciation, making them ideal for long-term investors. Gold ETFs and Mutual Funds provide liquidity and are suitable for moderate-risk investors. Physical gold carries storage risks and higher costs.”

1) Traditional way to buy gold: Physical gold

The most common way to invest in gold is to buy jewellery, coins, and bars. While gold jewellery holds cultural significance, it carries additional making charges. Alternatively, gold coins and bars can be considered a better choice for those seeking pure investment options, as they come with 24-karat purity and lower premium costs.

2) Market-linked alternative to investing in gold: Gold Exchange-Traded Funds (ETFs)

For those looking to avoid the hassle of storing physical gold, Gold ETFs offer a seamless option. These funds track gold prices and are traded on stock exchanges, providing liquidity and security without the risks of theft or impurity. Leading asset management companies (AMCs) in India offer Gold ETFs, making it easy for investors to buy and sell units just like stocks.

3) A Government-Backed option: Sovereign Gold Bonds (SGBs)

SGBs, issued by the Reserve Bank of India (RBI), have gained popularity due to their unique benefits. These bonds offer an annual interest of 2.5% along with price appreciation. However, the government has not launched new SGB tranches recently, making it necessary for investors to explore the secondary market for available bonds.

4) Buying gold at your convenience: Digital Gold

Several fintech platforms such as Paytm, PhonePe apps, etc., allow investors to buy digital gold in small denominations. This option enables users to accumulate gold without worrying about storage. However, investors should ensure they purchase from credible sources such as MMTC-PAMP, SafeGold, or banks offering digital gold services.

5) Indirect way to take exposure to gold prices: Gold mutual funds

For those who prefer a diversified approach, gold mutual funds invest in Gold ETFs rather than physical gold. These funds are managed by professionals, making them a hassle-free way to gain exposure to gold’s price movements.

6) For learned and experienced investors: Gold futures and derivatives

Gold futures and derivatives on commodity exchanges like MCX offer speculative opportunities but come with high risk. These instruments are suited for traders who understand market trends and price movements.

With SGBs currently unavailable in new tranches, the secondary market remains the only way to access them. Meanwhile, digital and market-linked gold investments are gaining traction, offering investors a mix of safety, liquidity, and returns.

"Gold acts as a hedge in times of economic uncertainty. We believe that gold should be considered purely for diversification and not for long-term wealth creation. Investors on a wealth-building journey should limit gold allocation to 10% of their portfolio to maintain a balanced asset mix and maximise long-term returns," said Bhatnagar.