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Tata Capital > Blog > Wealth Services > Different Ways of Investing in Gold and their Uses

Wealth Services

Different Ways of Investing in Gold and their Uses

Different Ways of Investing in Gold and their Uses


Gold investments are  viewed as safe investment options during times of economic turmoil as the gold market tends to move in the opposite direction of equities. Thus, investing in gold is regarded as a means of hedging one’s portfolio against market volatility, which is particularly important in today’s economic climate. The price of gold has been increasing throughout 2020, moving alongside growing  investor concerns over everything from the U.S China trade War, to the threat of long-term economic recession caused by COVID-19.

Gold can be bought and invested  in through a variety of ways, including purchases of physical gold and online investments. Here are the different ways in which you can buy gold.

Types of Gold Investment

Physical Gold

1. Jewellery

Jewellery is similar to investing in gold coins or bars, however, it is better to view them as expenses rather than an investment. An important reason for the same is due to the additional cost of having the gold turned into jewellery. If one were to sell their jewellery, they would not receive that additional cost back, referred to as ‘making charges’. Furthermore, the price of your jewellery can be affected by the performance of the gold itself.

These additional charges can range from 5% to 23% based on the jewellery being fashioned. An advantage of the same however is that the jewellery can be used as a possession by the owner though that has little relevance if the purpose of investing in the gold is as a long-term investment strategy.

2. Coins and Bars

Gold coins and bars do not have much use, all things considered. They are a valid and safe investment option and require additional making charges, though it is far less than it would be for jewellery.

However, both of the previous two options also come with the risk of physical damage or theft, and thus storing wealth in them can get tricky.

3. Gold Savings Schemes

These are schemes run by jewellers. One must deposit a sum every month and once this matures one can buy gold of the same amount from the jeweller. It is even possible to get an additional amount at the end of your total amount. However, while that may be an advantage, there are several risks such as the level of trust that is required to invest with a particular jeweller. Making charges are also applicable ranging from 5% to 23% even. These additional expenses may negate the bonus amount they choose to give you which means that the overall returns actually diminish over the period.

Additional Read: Why Gold is a Safe Investment Tool in an Economic Crisis

Non-physical Gold

1. Digital Gold

This method of gold investment is a cost-efficient way to partake in the form of online investment. It can be bought on various online platforms that are often associated with gold traders and manufacturers. It is found for as cheap as Rs. 1 and the gold can be used to make transactions at market price. One can choose to get the value of the gold in which you invested or have it delivered physically. The digital investment, either way, is backed by physical gold. Digital gold can even be used for further investments.

2. Gold Bonds

Sovereign gold bonds were launched by the Government  in 2015 and were created as another option instead of owning gold in the form of bars, coins or jewellery. This is an efficient and safe investment option as they have a lock-in period of five years with a term of eight years overall, providing fixed interest returns. While the bonds can only be redeemed for cash, they include no extra management fees, making them as safe and affordable  an investment as one can ask for.

3. Gold ETFs

A gold ETF is an exchange traded fund  that invests in gold and is traded on the stock market. While an ETF does not let you own any gold, it allows one exposure to the commodity’s performance. Investing in a gold ETF is fairly cost-effective, and though one can expect charges such as management fees and brokerage charges these don’t usually amount to much.

4. Gold Fund of Funds (FOFs)

In the same vein, ‘fund of funds’ is a set of mutual funds that invest in other mutual funds. They are high-risk investments as they are more expensive. They carry the charges for Gold ETFs since that is what is being invested in and come with their own additional costs as well.

Benefits of Gold Investment

Is it worth investing in Gold?

Online investment in gold is a good way for a beginner to invest as they each offer a variety of uses. These can be considered relatively safe investment options since they offer a fixed interest rate or are linked to the live commodity price and  offer the option of owning physical gold or receiving monetary value. However, it is important to assess the method that you choose,  keeping in mind the additional expenses that may need to be considered.

Additional Read: Why is everyone buying Gold?


Gold is a good investment opportunity to buy-in due to the stability of the product in an ever-changing market; It flourishes precisely when the wider market is struggling. However, before investing, you must very clearly lay out your expectations from the investment, namely, the amount of  risk you are looking for in the investment. Whether  you want to receive physical gold at the end of your investment (if investing in non-physical options) or not is another question to consider.

The reason for investing differs from person to person, but if you’re looking for accurate and customized guidance on how to secure and grow your finances during the pandemic, either through investing in a hedging mechanism such as gold, or other securities, TATA Capital’s Wealth Management solutions are perfect for you. Its team of expert Wealth Managers will help you find the investment strategy best suited to your long-term financial needs, and help you choose the right investments across a wide variety of investment options.

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