June 18, 2024

Types of Gold Investment in India and Reasons to Invest in Them

Traditionally, individuals invest in gold coins, bullion, jewelry, etc. However, these days investors have the option to park their money in new forms of gold investment in India. The newer choices also come with fewer hassles when it comes to accessing or investing in them. 

That said, let us read along to find out more about options of gold investment in India and reasons to invest in them. 

Types of Gold Investment in India

These are popular gold investment options in India:

  • Physical gold

This investment option requires investors to make direct investments in physical gold. Notably, physical gold can be easily sold at a higher value, making them quite liquid. However, physical gold also has a few downsides such as the accompanying making charges, increased risk of theft, and storage requirements.

  • Gold Exchange Traded Funds

Gold Exchange Traded Funds or ETFs are units that are paper representative or dematerialized from physical gold. While it is similar to initiating a direct investment, an investor can buy any share of ownership in a collective vault and not buy gold in the physical form. For instance, one gold ETF is proportionate to one gram of gold.

  • Gold Mutual Funds

This gold investment option allows individuals to park money in mutual funds of gold mining companies. 

  • Gold Schemes

Most leading jewelers in India offer customers gold schemes that make the process of purchasing gold easier. However, the hold schemes tend to vary among jewelers. Most gold schemes need investors to put a specific amount of money over a time horizon to generate a significant corpus. Once individuals have accumulated a substantial amount they can use it to purchase gold.

  • Digital Gold

This particular option of gold investment in India is becoming more popular among investors each day.  Typically, digital gold works like digital payment options where one can purchase or sell gold through leading fintech platforms. 

  • Sovereign Gold Bonds

This gold investment tool is introduced by the RBI. In this option, gold bonds act as securities that are traded as gold. It allows individuals to purchase the bonds in physical, digital, or dematerialized format.

Why Should One Invest in Gold?

These features and associated benefits of gold investment tools make them ideal for more than one reason. 

  • Helps Beat Inflation

What sets gold apart from most investment options is that it retains its value and helps generate inflation-adjusted returns. This is possible as the value of gold tends to rise with the surge in the cost of living and is often at its highest during the high inflation period. 

  • Diversification of Portfolio 

Diversifying portfolios is a must to balance out the risk-reward aspect of one’s investment portfolio. Since the value of gold tends to be inversely proportional to stocks and other traditional means of investment, investing in gold can offer spread-out risk. In other words, gold investment serves as a safety cushion against market volatility. 

  • Supply and Demand

The precious metal gold has a limited supply, which ensures it is always high in demand. Additionally, as the demand for gold surges in the market gold rate in India surge too. This makes the option of gold investment lucrative in India. 

  •  Liquidity

Owing to the readability with which gold can be exchanged/redeemed in the market adds to its liquidity. This aids investors to trade gold during an emergency or cash crunch, hence offering them access to money when they need it the most. 

  • Allows to Balance Currency Devaluation

Financial market uncertainties can erode the value of even the strongest currencies. However, unlike currencies gold can’t be reproduced by a machine. This rare aspect of the precious metal protects investors from the brunt of currency devaluation. 

  • Crisis Commodity

Gold has a reputation for being the ‘crisis commodity. ‘ It owes the tag to its quality to retain value even during the worst market situation. Notably, gold can overcome geopolitical and financial uncertainties. This is exactly why many nations tend to have huge reserves of gold to rely upon amid crises. 

  • Returns on Investment

Gold has a history of betting inflation and has always experienced a surge, despite the market situation. These aspects ensure investors that they will avail returns on their gold investment in India, making it a lucrative option for their portfolio.

Besides these, it is easier to own gold and avail of them in different formats. This makes gold investment in India a viable option for many investors. 

Difference between Gold and Mutual Funds

Here are a few key differences between investment options like gold and mutual funds:

  • Returns: Gold investing in India is known to generate stable returns, especially in the long term. However, mutual fund returns might vary based on the strategy. They also provide similar or substantially more returns than gold in some cases.
  • Risk: Gold is considered to be one of the least risky investments. This is because the majority of mutual funds invest money in the stock market, and the exposure to volatility makes them riskier than gold investments in India.
  • Liquidity: Gold is considered to be a highly liquid commodity. This is because one can readily change gold into cash, by simply visiting local jewellers. Similarly, mutual funds are open-ended, which it easier to sell them on the stock exchange.
  • Performance during Crisis: Gold performs well in times of crisis. During a crisis, the stock market often slumps, prompting investors to seek out safer alternatives such as gold. Alternatively, the stock market slumps and the NAVs of mutual funds decline. However, this is mostly temporary since investors can recover the fund when the investment market recovers.
  • Tax Benefits: There are no tax benefits on gold investment in India except for sovereign gold bonds and the gold monetization plan. In case of mutual funds, investors can save on taxes by investing in tax-friendly funds like ELSS.
  • Diversification: Investing in gold is a great way to diversify one’s investment portfolio. Similarly, mutual funds are also great at diversifying portfolios, as a single mutual fund puts money into different firms. 


Besides these individuals should find out more about options of gold investment in India to make the most of their features and benefits. However, individuals should also weigh their risk-taking capacity and financial goal before selecting any specific type of gold investment option.

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