Gold has proven to be a safe haven with increasing returns over the years. Therefore, for any investment goal, it is always advisable to purchase gold. In the last few years, the purchase of digital gold, gold ETFs, SGBs has seen a significant spike.
Gold has proven to be a safe haven with increasing returns over the years.
Today is Akshaya Tritiya or Akha Teej, which is one of the many auspicious days for buying valuable assets, such as gold, diamonds, vehicles, and others. The festival, just like Dhanteras during Diwali, is said to bring in good luck, success and prosperity if investments are made in certain assets.
Buying gold on Akshaya Tritiya is considered as a good omen and has been a tradition for ages. But with changing times and investment-focused customers, other options like digital gold, Sovereign Gold Bonds, Gold ETFs, and gold-linked stocks are gaining popularity.
The purchase of digital gold, gold ETFs, SGBs has seen a significant increase in popularity in recent years. In the current digital era, many consumers find the traditional process of visiting jewellery stores and buying gold jewellery burdensome with limited return options. This shift in consumer behavior is particularly noticeable among younger investors who are increasingly opting to buy gold through digital platforms.
The current price of gold in Delhi NCR is Rs 71,700 per 10 grams. Last year, on Akshaya Tritiya (April 22), the price of gold was Rs 61,300 per 10 grams. Therefore, the one-year return for 24-carat gold stands at around 19 per cent. Analysing gold CAGR returns over the last 15 – 20 years from Akshaya Tritiya to Akshaya Tritiya, gold had delivered a 12–13% returns.
Let’s look into gold investments other than gold jewellery
1. Gold ETF: Gold Exchange Traded Fund or Gold ETFs are commodity-based Mutual Fund that invests in assets like gold. These ETFs perform like individual stocks and are traded similarly on the stock exchange. Gold ETFs started gaining popularity from the Covid times. As per a factsheet by Zerodha Fund House, during the pandemic period, there was a significant surge in AUM for Gold ETFs. It rose from Rs 5,527.76 crore in December 2019 to Rs 13,819.39 crore in December 2020. The momentum persisted as the AUM further expanded. Data as of December 2023 showed that the AUM is currently valued at Rs 25,959.02 crore. This represents an impressive growth of 27.29% compared to December 2022 and an overall increase of 87.84% since December 2020, underscoring a robust upward trend in investment into Gold ETFs over this span.
“Investing in gold ETFs offers unparalleled advantages including liquidity, cost-effectiveness, and security. By investing in gold ETFs like Zerodha Fund House’s Gold ETF (NSE, BSE symbol – GOLDCASE), investors can eliminate the hassle of storage, purity concerns and insurance associated with physical gold, while enjoying the flexibility of investing on the stock exchange,” said Vishal Jain, CEO, Zerodha Fund House.
“Depending on preference and risks, investors can either buy gold ETFs or traditional gold in physical form. Investing in ETFs can typically be a bit lower cost since they don’t incur jewellery making charges or any other markups – as an investor you just have to bear the management and brokerage fees. In case of gold ETFs, when you sell your investments the gains would be considered as Short Term Capital Gains and taxed based on your income slab. Unlike physical gold, you will not get any indexation benefits,” said Anil Ghelani, CFA, Head – Passive Investments and product, DSP Mutual Fund.
“Gold ETFs provide exposure to gold prices without holding physical gold. Gold is seen as an inflation hedge, but returns are volatile. Investors must evaluate portfolio fit, costs like securities transaction tax, and capital gains implications. While cultural sentiments may boost seasonal gold demand, disciplined asset allocation aligning with one’s risk profile and goals should guide investment decisions rather than auspicious timing alone,” said Atul Parakh, CEO, Bigul.
2. Sovereign Gold Bonds (SGB): Sovereign Gold Bonds (SGBs) are government-backed securities that offer a unique opportunity to conveniently and securely own gold. These gold bonds have an eight-year maturity period. This can be extended by a period of three years. It can be purchased directly from the government via the primary market or held in demat form if bought from the stock market. They can be sold directly back to the government from the fifth year onwards.
“When coming to buying gold, we would prefer SGBs over ETFs because they are tax efficient. Following the withdrawal of tax benefits from Gold ETFs and Gold-based Mutual Funds, SGBs emerge as the premier method to gain exposure to Gold. They offer interest of 2.5% p.a. in addition to the capital gains provided by Gold,” said Vijay Kuppa, CEO of InCred Money.
He added: “Holding SGBs until maturity grants tax exemption on gains, with long-term capital gains from bond transfers enjoying indexation benefits, setting SGBs apart from other gold investments. Besides, SGB units, whether in Demat form or physical certificates, eliminate theft risks and the need for gold maintenance. As government securities, SGBs assure investors of gold’s market value at maturity along with periodic interest payments.”
“Gold ETF has one major advantage over SGBs which is liquidity without any lock-in. Sovereign Gold bond comes with a lock-in period of 8 years however, one can sell after 5 years on stock exchange. While, Gold ETF can be easily bought and sold through the stock exchange at any given day within the prescribed market time around the current gold prices. Hence hold ETFs can be used tactically to buy and sell around desired levels and for long-term allocation which can be redeemed anytime. Also, there is maximum subscription limits applicable in case of SGB which is not the case in Gold ETF,” said Siddharth Srivastava, Head – ETF Product and Fund Manager, Mirae Asset Investment Managers.
“Sovereign Gold Bonds have a few unique benefits such as 2.5% annual interest and tax benefit if held till maturity of 8 years. However, there is relatively lower liquidity. There is a lock-in period of 5 years during which period you can sell your investment only in the secondary market which can at times be at a discount to the fair value. Gold ETFs are often relatively more liquid with better price discovery closer to actual market price of physical gold. Hence, gold ETFs can enable you to buy or sell to take timely advantage of price movements in gold. SGBs are available mainly for individuals whereas gold ETFs can be used by individuals as well as corporate entities, without the upper cap of 4kgs applicable in case of SGBs,” said Ghelani of DSP Mutual Fund.
Gold Stocks: “Akshaya Tritiya presents both opportunities and challenges for investors considering gold-related stocks. While the occasion traditionally fuels demand, potentially boosting jeweller stocks, current high gold prices may dampen overall sales. We recommend caution due to this and the possibility of a short-term market correction. However, gold’s long-term potential as a hedge against inflation and economic uncertainty remains attractive. Titan and Kalyan Jewellers are our top picks for those who are interested in buying gold stocks in these Akshaya Tritiya. Titan – One can buy at current levels Rs. 3290 for Target Rs. 3500/3700+ with Stoploss Rs. 3050 Kalyan Jewellers – One can buy at current levels Rs. 394 for Target Rs. 450/500+ with Stoploss Rs. 350,” said Pravesh Gour, Senior Technical Analyst, Swastika Investmart Ltd.
