Chasing The Glitter

There Are Multiple Avenues For Investing In That Indian Obsession, Gold. But Investors Must Exercise Discretion While Making The Choice, Keeping In Mind Their Short-and Long-term Aims

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INDIANS HAVE ALWAYS coveted the glitter of gold. That desire has stood the test of time, despite challenges from newer financial instruments that promise to deliver better returns.

This is visible in the latest data from the World Gold Council. In its report, Gold Demand Trends 2023, it said Indian gold bar and coin demand rose 7% year-onyear in 2023 to 185 tonnes, while jewellery demand dropped 6% to a still substantial 562.3 tonnes. However, physical gold-backed exchange-traded funds hit a record of 42 tonnes by year-end.

One reason why gold has remained a popular asset is its traditional role as a hedge against inflation. Besides, adding gold to portfolios can help with diversification. Considering this insatiable demand, multiple forms of gold investments have been introduced over time: from minted products (coins and bars), gold bonds, and digital gold to gold exchange-traded funds (ETFs) and mutual funds.

Each of the options comes with its advantages and drawbacks. Physical gold risks theft and burglary, while gold ETFs and bonds have custodian risks and others not present with physical gold.

THE AVENUES

Physical gold—gold coins, jewellery, and bars—can be purchased from a jeweller or a bank. The advantage here is that you have direct ownership, plus it holds sentimental value for many Indians. But one must consider the associated risks here, like storage, safety, making charges, and the risk of receiving less than the market value when sold.