How Indians Invest in Gold?

India is one of the largest consumers of gold in the world. Indians love to buy gold jewellery for themselves and to gift to their loved ones. It is also one of the primary items people gift to brides for her wedding. In short, Indians love to spend lavishly on this bright and shiny metal even though the returns are not as great as that from other investments. However, it is considered a safe investment as the price of gold increases with time and the metal also holds strong in the times of economic uncertainty. Another reason why gold is a favourite amongst Indians is that it is easy to sell as compared to paper investments or property. It can work well for both novice investors as well as experienced investors. New investors can start with investing in gold since it is a relatively safe form of investment while experienced investors can invest in gold to improve their investment portfolio. There are plenty of other factors that dictate the buying or selling decisions of an average Indian investor when it comes to gold. Here are a few ways in which Indians invest in gold: Gold Jewellery: Indians love to invest in gold in one of the traditional ways, gold jewellery. Since gold is considered to be a status symbol, many people love to wear gold jewellery too. They purchase gold jewellery and wear it on a daily basis and sell it later when gold appreciates in price or if they face a cash crunch. The gold rates are a key determiner of how the rates of this jewellery moves. When the gold rates are high, the cost of the jewellery increases and when they are low, the cost decreases. It is easy to purchase or sell gold jewellery in India unlike real estate assets and other investments as it does not require a lot of documentation. The lesser documentation is one of the primary reasons for purchasing gold jewellery as investment. Leading banks provide locker facilities where people love to keep their gold jewellery to keep it safe when it is not in use. Gold jewellery is usually made out of 22 carat gold while 18 carat gold is used to make diamond-studded gold jewellery. Gold Coins/Bars: When it comes to investing seriously, many people prefer to purchase gold coins and bars. Leading banks and jewellers sell gold coins and bars that the customers can purchase with minimal documentation. These gold coins and bars often come with a certification to endorse the authenticity and purity of gold. The certificate attests that the coins/bars are made out of 24 carat gold, which is its purest form. Gold rates have a more potent say in the price of gold coins or bars as compared to jewellery. This is because the coins and bars are pure gold and the prices can easily move with the gold rates. Jewellery on the other hand includes other previous stones whose rates move differently than gold rates. Gold bars and coins can be bought in multiples of 50 ranging from 0.5 g up to 1 kg. One of the advantages of investing in gold bars or coins as compared to gold jewellery is that the buyer does not have to pay any production charges (that are levied on gold jewellery). The price that the customer pays to make the purchase goes entirely into the amount of gold bought. E-Gold: Since security can be an issue for many people when it comes to gold, the option to invest in e-gold or digital gold is also available for people in the country. No physical gold is traded on the National Stock Exchange (NSE) and yet investors reap the benefits equivalent to investing in physical gold. People do not have to worry about keeping the gold safe in lockers or hidden drawers. The gold rates also play a key factor in the price of e-gold. The Government of India issues Sovereign Gold Bonds to interested customers. Customers also earn interest semi-annually when they decide to invest in such gold bond schemes. These bonds are easy to buy and sell also. There are also a few ways to invest indirectly in gold such as investing in the equity-based gold funds. Here, the customers invest in the mines and market gold. However, it is not very popular among Indian investors since it is considered to be a high-risk investment. However, the returns on the investment come from the performance of the funds irrespective of the increase or decrease in the current gold rates.