Comparison between Physical Gold, Gold ETF and Gold ETF

  • Posted By :
  • Monday Nov 05, 2018

Physical gold vs gold ETFs vs gold SGBs: What should you invest in this Dhanteras

Indians have always had a particular inclination towards gold. It is not only a commodity of prestige and fashion but also a great investment option. Gold is believed to have a good hedge against inflation. Its price tends to rise when the cost of living increases. This means there’s a good chance that your precious metal investments won’t lose its value along the years. 

Buying gold is particularly considered auspicious during Diwali. Many people buy gold on the first day of Diwali, which is called Dhanteras. Doing so is believed to bring in good luck and fortune. 

However, these days, gold investments are not limited to physical yellow metal. Physical gold alternatives like Gold Exchange Traded Fund (ETF) and Sovereign Gold Bond (SGB) have gained popularity because of their distinctive features. 

So, this Dhanteras, if you’re looking to invest money in gold, consider gold ETF and gold SGB, along with physical gold too. Take a look at all three before you choose your gold of choice this festive season. 

Physical gold

Buying physical gold has been the most conventional way form of investment which could be in the form of jewellery, coins or ingots. Buying gold jewellery gives you the added benefit of using your investment as a stylish accessory. However, if you’re buying it solely for investment purpose, you need to be cautious as gold jewellery resale value is comparatively lower than gold coins and ingots. You also need to be careful of the safety factor when it comes to physical gold. It is highly susceptible to theft and burglary. You need to keep it safe at home or pay for a safety locker in a bank to keep it secure.

Investing in physical gold (jewellery, coins or ingots) gives you the benefit of high liquidity too. You can exit from this investment at any time at the prevailing gold buying rate. However, it is essential to consider that the buying and selling price of gold varies significantly. Another advantage of physical gold is that you can use it to take a loan against it in your time of need. If you’ve been holding physical gold, you can use it to take a loan for purchasing gifts during Diwali too. 

Gold ETF

Gold Exchange Traded Funds (ETFs) are traded on the stock market. You can buy and sell it in real-time during trading sessions. You do not get gold ETF in the form of physical gold. These investments get safely deposited in your demat account. Unlike physical gold, here, you can buy as small as one gram of gold or as much as you can afford and gradually accumulate it in your account to multiply your investments. You can buy gold online on that offers you multiple gold ETF options. Gold ETF is also eligible for Long-Term Capital Gain (LTCG) at 20%, with indexation, if you hold it for more than three years. However, you also have the option to liquidate it beforehand as you please, although you will not receive LTCG benefits. 

Gold SGB

Sovereign Gold Bond (SGB) is a new type of gold investment introduced by the government. The gold bonds for investments can be purchased at select post offices, designated banks and through stock exchanges. When buying SGB, you can buy as low as one gram of gold and over time acquire more to boost your portfolio. You can then keep these investments in the form of demat or on paper. 

Like gold ETF, SGB is also entitled to capital gain benefits. In addition, you also get the benefit of interest on the invested amount. SGBs can be an auspicious gold-buy during the festive season. It can also be used to take a loan for buying gifts next Diwali if you’re running low on funds. 

As you see, it is worth considering gold ETF and SGB as a means of gold investment this Dhanteras. Like physical gold, these investments have the benefit of capital appreciation. Plus, there are more advantages like long-term capital gains and security too.

Physical Gold v Gold ETf v Gold SGB

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