In the past, gold investors didn’t have many options other than parking their fund in physical gold. However, over time, markets found new gold investment avenues and now investors have as many as five options – Sovereign Gold Bonds (SGBs), Gold ETFs, Gold Funds, digital gold and physical gold.
Let’s briefly understand the key features of each of these gold investment tools, one by one.
Sovereign Gold Bonds (SGBs): The Reserve Bank of India (RBI) launched this bond scheme for gold investors in 2015, offering an interest rate of 2.50% (fixed rate) per annum on the nominal value. The interest amount is credited semi-annually to the investor’s account and the last interest gets paid on maturity along with the principal.
The minimum investment limit in SGBs is 1 gram and the maximum limit is 4 Kgs for individuals and HUFs (Hindu Undivided Families) and 20 Kgs for trusts and similar entities in a financial year.
Also read: Gold or Gold ETF: What should you buy on Dhanteras? Returns of 1, 3 and 5 years compared!
Gold ETFs: Gold ETFs (Exchange-Traded Funds) trade on stock exchanges and can be bought and sold continuously at market prices. Gold ETFs are passive investment instruments directly linked to current physical gold prices and invest in gold bullion.
Gold Funds: Gold MFs hold assets related to gold. Like other mutual fund schemes, gold mutual funds also operate at the day’s NAV and allow SIP investments to subscribers with a minimum amount of Rs 500. Gold MFs help investors gain an exposure to the price movements of physical gold, without the need to own the metal.
Digital gold: As the name suggests, digital gold enables investors to buy electronically and possess the precious metal digitally in a vault. This is in contrast to conventional gold investments, where investors purchase gold in the form of bars, coins and jewellery. The value of digital gold is directly linked to the physical gold of 99.9% purity.
Physical gold: Physical gold can be bought in the form of jewellery, coins and bars. Physical gold, especially sold through jewellery items and coins, is available in the market in various purity forms like 24-,22- and 18 Karats.
Also read: How much a Rs 1 lakh investment in gold,
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