Akshaya Tritiya, a Hindu and Jain festival, is considered to be an auspicious day to purchase gold in India. Here are the different ways you can invest in gold:
Akshaya Tritiya, a Hindu and Jain festival, is considered to be an auspicious day to purchase gold in India. According to the World Gold Council, India's gold demand is expected to rise in the June quarter from a year ago due to a higher number of auspicious days for weddings and a fall in local prices ahead of Akshaya Tritiya. On Monday, gold prices in Delhi rose by Rs 75 to Rs 32,720 per 10 gram.
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Apart from Akshaya Tritiya, gold is an essential part of a bride's dowry in India and also a popular gift from family and guests at weddings. Gold consumption in the second quarter last year came in at 189.2 tonnes, the WGC said in its report. As per 2018 figures, India is the second highest consumer of gold after China as it had a demand of nearly 760 tonnes.
The traditional way of investing in gold to buy a bar of gold or any other form of gold from jewellers. Here are other ways of investing in gold:
Gold exchange-traded funds (ETFs) are similar to mutual fund schemes. One can buy or sell these gold units or parts through a broker via a demat or trading account. Since this happens through the stock market, gold is an underlying asset. The trade in the stock market takes place at the market price between the existing holders of the ETFs and the new subscribers.
The ETFs take into the domestic price of gold but it largely depends on the demand and supply of these units in the market. Based on the demand, the gold units can be traded at a discount or a premium to the market price or net asset value of the fund.
The method of investment is cheaper than investing in gold in the physical or traditional form as one is only required to pay the fund management in-charge and the service charges of the broker. And if in case, the investor does not have a demat account, those charges will also have to be paid.
Sovereign Gold Bond
Investing in sovereign gold bonds can fetch interest of 2.5 percent per annum on the face value of the bonds. To put it in simple words, if the prices of gold rise, the investor in the gold bonds get the benefit of the price gain and the interest, and if the gold prices fall, the investor is not affected because the gold bond investor will still be receiving the interest benefit.
The bonds are issued by the Reserve Bank of India (RBI) and every Indian citizen, except non-resident Indians (NRIs), can invest. The central bank fixes the price of the bond and the bonds can be bought from banks and the stock exchanges.
The investment can be made up to Rs 20,000 through cash, cheque or demand draft, and the bonds are issued in denominations of one gram and its multiples. The time period of this investment tenure is eight years and a premature exit is allowed only after the fifth year. In case one wishes to exit before the fifth year, he or she can sell the bond in the secondary market.
You can also buy gold online through mobile wallets such as Paytm, Motilal Oswal's Me-Gold, among others. The purchase of gold online is offered by MMTC - PAMP, which is a joint venture between public sector MMTC and Switzerland's PAMP SA.
When a ‘buy’ order is placed through the app, the JV buys an equivalent value of hallmarked gold in the investor's name and stores it in its vault.
The investor can buy gold for as less as Rs 1,000 or 0.3 grams. The orders for trade, that is the buy or sell of the digital asset, can be placed at any time of the day and on all days of the week.