Gold price rise: 4 alternative ways to invest in gold

There was a time when gold investments were related to buying only physical gold in the form of jewellery, coins, bars, etc. But times changed, and technology impacted all walks of life. Gold investment has also not remained untouched. Alongside physical form, electronic forms of investment into yellow metal have emerged.

People can now invest lakhs and crores in pure gold without holding a single gram of it in physical form. They get all the benefits of gold price appreciation and can redeem their investments the same day, or in some cases next business day, when the commodity/share market opens.

Since the festivals of Dhanteras and Diwali are just around the corner, a lot of people are rushing to buy physical gold. But if they are interested in only the returns of the physical gold, they can invest in gold in its digital form. Here are the 4 alternative ways to invest in gold without buying jewellery.

1. Digital gold


Digital gold is backed by high-purity gold and tracks its rates. Unlike physical gold, it doesn’t have any making charges. Digital gold sellers store it in its digital form. This type of gold provides high liquidity and can be bought and sold 24/7. Investors can invest in digital gold with as low an amount as Re 1. They can make a lump sum investment in digital gold, while many gold investment platforms also offer the systematic investment plan (SIP). To invest you can look for options like Tanishq, MMTC-PAMP and PC Jeweller…As per Tanishq’s website, when a person sells their digital gold, they receive money in their account. The company also provides the option to convert digital gold into physical gold You also don’t have to incur any cost of storage.

2. Gold ETFs


Gold Exchange-traded Funds (ETFs) invest in pure physical gold and investors get the benefit of returns of gold without holding the yellow metal in physical form. These ETFs can be bought and sold in a share market like any other stock. A buyer needs to have a demat account to buy gold ETFs. They provide high liquidity, but they can be traded only during market hours. The other benefit for investors is that gold ETFs are passive funds and have a low expense ratio.

"For investors looking for gold exposure, gold ETFs are the most efficient option as they avoid major costs associated with physical gold, such as storage costs, hallmark costs, insurance costs, making charges, and wastage charges," said Chirag Muni, Executive Director, Anand Rathi Wealth Limited.

"It is recommended for investors to prefer Gold ETFs over digital gold, as they provide greater flexibility, higher liquidity, and minimal expense costs, making them a more efficient choice for long-term wealth allocation," Chirag added.

Gold ETFs can give multiple time returns in the long term. The return will depend on the gold price rise. If we take the example of Nippon India ETF Gold BeES, India's oldest gold ETF, it has delivered an astounding 950% return since its inception in July 2007. It has turned a Rs 10 lakh investment into over Rs 1 crore in 18 years.

3. Gold mutual funds


Gold mutual funds also invest in pure gold through the fund of fund structure. These funds buy the units of gold ETFs. Investors can make a lump sum investment in gold mutual funds, or they can start an SIP. Gold mutual funds are good for beginner investors who don’t want to invest in pure gold directly. The expense ratio of a gold mutual fund is usually higher than gold ETF and hence the returns would be slightly lower than the actual gold or gold ETF.

Gold mutual funds can also give decent returns in the long term. Looking at the performance of the top-performer mutual fund in 10 years, ABSL Gold- Direct Plan - has given 15.86% annualised return.

It means Rs 10 lakh invested in the fund 10 years ago is worth over Rs 44 lakh now.

4. Sovereign Gold Bonds (SGBs)

SGBs are securities issued by the central government through the Reserve Bank of India (RBI). SGBs are backed by gold of 999 purity and have an 8-year maturity period. However, they are available for early redemption after the fifth year from the date of issue. At present, no fresh investments are available in SGBs, and they can be purchased only through the secondary market. Apart from benefitting from gold price appreciation over the years, SGBs typically offer an annual interest of 2.5% on the initial investment.