For many investors, gold is a long-term investment to protect their money. For Indians, it also has emotional value. Today, there are various ways to invest in gold, you can buy coins or jewellery, or choose market-linked options such as Gold ETFs through your demat and trading account.
This guide will make it easier for you to choose which form of gold suits your needs and long-term plans.
Understanding Gold ETFs
Gold ETFs are exchange-traded funds that invest in gold and trade on the stock exchange like shares. Each unit usually represents a small quantity of gold. You can buy and sell them through your usual broker, and the price broadly follows domestic gold prices. This gives you exposure to gold price moves without needing to handle storage or purity checks on your own.
Returns Comparison - Gold ETF vs Physical Gold
Both forms are linked to the same underlying metal, but the way you earn and measure returns is slightly different.
What You Compare | Gold ETF | Physical Gold |
Link to price | Tracks the market price of gold, with a small impact from fund costs | Based on the gold price, plus the making and design elements if buying jewellery |
Price clarity | Price visible on the exchange during the trading day | Price depends on your local shops and quotes and can vary |
Extra charges | No making or wastage charges on the investment | Making charges and other cuts lower the real gain |
Typical use | Used mainly for financial investment and portfolio mix | Used for family use, gifting and long-term holding |
Cost and Expense Analysis
When you buy Gold ETFs on the exchange you pay brokerage and securities charges as per your broker's schedule. The scheme also has a yearly expense ratio which is adjusted within the price, so you never see a direct bill. In return, you avoid making charges, wastage and high spreads that often come with jewellery, and you do not have to pay for a bank locker to store it safely.
Liquidity and Ease of Selling
Gold bought in this way can usually be sold in small amounts when the stock market is open. The money from the sale is then paid into your linked bank account in the usual time for such trades.
With coins or ornaments, you may have to visit a jeweller, compare prices and accept cuts for design or old items. Selling bigger pieces for cash can also take longer if you want to check prices at more than one shop.
Safety, Storage, and Risk Factors
In demat form, units are held in electronic records in your depository account. This removes worries about theft, loss or damage at home. You are still exposed to market risk because gold prices can move up or down over time.
Physical gold carries both price risk and the added issues of storage, purity doubts and the quality of the buyer when you decide to sell. Insurance and locker fees add to the overall cost for long holding periods.
Taxation Comparison In India
Tax rules can affect how much you keep after you sell, so it is important to know the basics.
● Both types of items are considered assets, and selling them can result in capital gains.
● The tax you pay depends on how long you held the investment before selling it.
● The rules for gains from traded products may differ from those for jewellery or coins.
● Tax rates and rules can change, so it's beneficial to stay up to date.
Investment Convenience and Flexibility
For many investors, the biggest difference is how easy it is to buy, hold and track the investment. Gold ETFs can be bought in precise rupee amounts, held in your demat account, and monitored on the same screen as your other holdings. Some investors use options such as SBI Gold ETFs to invest in gold in small amounts over time, avoiding the need for physical purchase or storage.
Who Should Choose What?
If you want gold mainly as part of your financial portfolio, prefer clean pricing and do not want to handle storage, the electronic route may work better. If you value the emotional and cultural side of owning ornaments for family use, physical gold can still have a place in your overall plan.
Many long-term savers use a mix of both forms, keeping financial units for core investment needs and buying coins or ornaments only for special occasions.
Conclusion
Both these forms of gold give you exposure to the long-term role of gold, but they work differently in daily life. Gold ETFs can offer clearer pricing, easy buying and selling, and freedom from storage worries. Physical gold remains relevant for purposes such as tradition, gifting and personal use. A simple comparison of returns, costs, taxation and convenience can help investors choose the mix that best suits their objectives and risk profile.
(The views, opinions, and claims in this article are solely those of the author’s and do not represent the editorial stance of The Assam Tribune)