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Alternatives of Physical Gold Explained. Part - I

Let’s just agree once and for all!

We all love Gold!

I mean who doesn’t love gold. I’m sure you too love gold or if not maybe like it. Who doesn’t like to get blinded by the shining material?

Gold has been and will be an integral part of the Portfolio of us Indians. Apart from being a type of Investment Product, it also has an auspicious importance in our lives.

We purchase gold when someone gets married in our families, we purchase gold for our children for their marriage in the future, we also purchase small if not large quantities of Gold every Akshaya Tritiya.

From being a part of our Investment Portfolio to being an apparel/accessory on our bodies we can’t just get enough of Gold. So today, I bring to you some of the alternatives of Physical Gold which you can consider for your Investment Purposes if you are an avid Investor of Gold or occasionally purchase Physical Gold for Accumulating it.

In this article, I have covered the two closest alternatives of Physical Gold, while for the rest of the alternatives, I will post another article for it next week. You can read Part - II here.

Sovereign Gold Bonds

This form of Gold in the form of Bonds issued by RBI has been the current favorite of Investors as it offers 2.5% of Interest on the Invested Amount apart from the growth in the value of your purchased quantity of Gold. The Bonds pay 2.5% of yearly Interest and the market price of the Gold when the Bond gets matured. The price of gold is closely linked to the price of Physical Gold. It has a Maturity period of 8 years from the purchase date and can be redeemed after 5 years. And as it is issued by Government, it carries no default risk and has the highest form of security. Also, the net difference earned at maturity is tax-free. For example, if in 2020 you had purchased one unit of Sovereign Gold Bond at 4692/- and when the bond matures at 8684/- the net difference of 3992/- is Tax-Free.

No Capital Gain Tax is charged on the amount. However, the yearly interest payment is taxable as per the tax bracket of the buyer of SGB. We have a detailed article written on Sovereign Gold Bonds explaining its features and much more. You can read this article here.

Digital Gold

This is the near most substitute of Physical Gold as Digital Gold is Gold but Digital. Its popularity has been rising slowly and steadily nowadays in India as this eliminates the risk of storing physical gold. You can start buying small quantities of Digital Gold and when you actually need it you can take its physical delivery and just like that, your gold will be delivered to you at your doorstep when you actually require it. You can sleep peacefully while someone protects your gold till you don’t require it and when you do, you can order it at your ease. That someone who protects it is the custodian of the gold and your gold will be actually kept in the locker somewhere where the custodian can take care of the gold. Of course, there are storage charges which are charged at the time you purchase the units of Digital Gold. And this is why the purchase price is higher than the price of physical gold while the selling price is closely related to the price of Physical Gold. If you want a detailed article, explaining Digital Gold. Comment below and we will try to bring it ASAP.

Comparing Sovereign Gold Bond and Digital Gold

These were the two closest alternatives of Physical Gold, prices of which are closely linked with the Prices of Gold. Next Week in the 2nd Part of this Article, I will explain about the other alternatives. Till then this is Shreyans Shah signing off, you stay safe.


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