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Buying Gold in India: What is the best way?

Created on 03 May 2023

Wraps up in 5 Min

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Gold has been a popular investment option for centuries, and for good reason. Buying Gold not only allows you to hold a tangible asset whose value appreciates over time but also safeguards your portfolio during economic downturns. Buying Gold could be a cumbersome process, given the multiple options available. This blog aims to help you in your Gold buying process & make the best returns on your investment. 

India’s Love for Gold & Top Reasons for Buying Gold 

India is the world’s second-largest buyer of Gold, accounting for around 25% of global demand. A recent survey by the World Gold Council found that 61% of Indian respondents were likely to buy gold in the next 12 months, higher than the global average of 46%.

The main reasons cited for buying gold were as a store of value (69%), a long-term investment (58%), and a way to diversify investments (44%). 

Should you buy Gold?

Current economic uncertainty, stock market volatility & recent world affairs have caused investors to reassess their portfolios. Amidst all this chaos, financial experts are telling investors to turn to gold investments. The uncertainty has led to many countries importing more Gold into their treasuries.

Central banks added a whopping 1,136 tonnes of gold to their stockpiles in 2022, by far the most of any year in records going back to 1950. The World Gold Council expects central banks to remain positive towards gold and continue to boost their holdings this year. These central banks are creating an environment that is conducive to higher gold prices.

Here are a few facts that will help you evaluate further if buying gold is a good investment:

  • ~11% p.a historical CAGR
  • 80% positive years
  • Best track record as a hedge against inflation
  • Beats NIFTY 4 out of 5 times in the last 5 years

It is advised to have 15-30% of your portfolio in Gold to maintain a healthy portfolio. The other rule that is quoted by multiple experts is to have a minimum of half your age as net worth percent in gold. 

Is now the right time to be buying Gold?

Gold is a good asset to buy when there is market uncertainty & volatility. That being said, buying Gold for the long term is what is recommended. 

Considering inflation & stock markets underperforming, this may be the best time to buy gold. Even if inflation cools off, it is still not expected to be lower than what it was. Investing in/Buying gold now can help, considering the possibility of gold prices increasing in the future. Gold prices are expected to touch a ₹70 thousand per 10 gram by the end of this year & the next 3-5 years also look very strong for gold. 

What are all the ways you can buy Gold & maximise returns?

When you think about buying gold, you probably think of going to a jeweller. That is one way to buy gold, especially if it;s meant for your "sweet someone", but if you want to invest in gold for some cha-ching, there are a few varieties you might want to look into.

1. Physical Gold:  You can buy physical gold in the form of coins, bars, or jewellery. You can buy gold coins and bars from a dealer or online retailer. 

2. Digital Gold: This is the future! If you want to invest, it is time to go digital. Digital gold is where you get a buffet of options.

  • Sovereign Gold Bonds(SGBs): These are government-issued bonds that are denominated in grams of gold. The bonds are issued periodically and can be purchased from banks, post offices or stock exchanges. The bonds offer an annual interest rate of 2.50% on your initial investment, i.e. simple interest. This 2.5% is on top of gold's annual returns of ~11% through value appreciation.
    These have a fixed maturity period of 8 years but can be sold in secondary markets pre-maturity at a discount of 5-6%. When sold/bought in secondary markets, you lose the benefit of capital gains tax exemption which is one of the advantages of investing in SGB. 
  • Gold ETFs: These are exchange traded funds. ETFs are listed on the stock exchanges and can be bought and sold like stocks. Returns from Gold ETFs are equivalent to that of Gold’s annual returns. There are no lock-in periods, investors can sell it at gold’s price at any moment.
  • Gold leasing: This is a gold investment option that has existed in the offline markets for quite some time. In gold leasing, investors, after buying gold, can lease it to jewellers. The jewellers then provide them with a rent in the form of gold grams on the quantity leased. This practice was earlier accessible to the UHNIs while buying gold. However, with fintech apps coming up with new technology, gold leasing is now accessible to every investor out there. There are a variety of gold leasing platforms that provide investors with the extra 3-5% returns. In the next section we will learn about them in detail.

Which gold leasing platforms offer the best returns on gold?

In this section, we’ll take a look at the different gold leasing platforms.

1. Gullak: Gullak is an automated investments app with which users can invest in 24K digital gold. With its latest offering, Gullak Gold+, the platform provides additional 5% returns every year. The extra 5%, along with Gold’s annual returns of 11% p.a., gives investors the opportunity to earn up to 16% returns on their investments.

All the jewellers on board the app are verified by Gullak’s gold partner, Augmont, which also provides a 100% bank guarantee against the leased quantity.

Currently, the jeweller in the app is RSBL(RiddiSiddhi Bullions Ltd), which is one of India’s biggest jewellers with an annual turnover of more than 28000 Cr and has been one of the major players in Indian markets for more than 25 years. Additionally, after buying gold and leasing it, investors can un-lease and withdraw their gold anytime without any additional charges.

2. Jar app: Jar is also a gold investment app which has recently introduced gold leasing with its new feature, Gold X. With Gold X, users get additional 3% gold every year.

This allows investors to earn up to 14% returns p.a. The jewellers are vetted by Jar’s Gold partner, Safegold. Generally, any lease on the app comes with a lock-in period of at least 180 days.

3. Safegold: This is a platform where investors can buy, sell or receive Gold at affordable rates. The platform launched its feature Safegold Gains in 2022. Using Safegold Gains, investors can lease out their gold to a variety of jewellers across India.

Any lease in the platform has a lock-in of at least 180 days and gives extra 3.5% returns p.a. Investors also get bank guarantees on their leased gold.

The Bottom Line

If you want higher returns while buying gold and do not mind taking a slight risk you can consider adding gold leasing to your investment portfolio. Gold leasing provides investors with the best returns on gold, beating returns from the previous best gold investment option of SGB(Sovereign Gold Bonds). Gold leasing platforms like Gullak, Jar and Safegold ensure investors' safety & security via multiple checkpoints like vetting of jewellers for credit worthiness, providing investors with additional layers of security & bank guarantees on their investments.

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Devanshee Dave

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Devanshee has 5+ years of experience in writing content on finance & economy, allowing her to have a strong gravitational pull over the subject matters. She is a finance enthusiast and enjoys simplifying finance to help readers turn mundane numbers and jargon into fun-to-learn concepts! Devanshee holds a Masters In Mass Communication and Journalism.

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