Purchase in physical form subject to several charges, both while buying & selling
GOLD, which is considered safe-haven as an investment, has proved to be a must-have asset in one's portfolio. Experts usually advise people to have at least 10 per cent of exposure to the yellow metal.
So what are the different options of buying gold and what would be the best option to own gold? Financial Chronicle provides you the options to purchase gold.
Today you can buy gold either in paper form, such as through an exchange-traded fund or in electronic form recently launched by National Spot Exchange (NSEL). Or, you can buy gold the old-fashioned way and hold it in physical form such as coins, bars or jewellery
Physical gold can be bought through a jeweller or a bank. But more recently, banks and post offices have also started offering gold bars and biscuits for sale. If you buy gold coins or bars worth more than Rs 50,000, then you will need to show your PAN card and an ID proof.
The advantages of buying gold in physical form are that it is tangible and it can be used for consumption purposes such as gifts and special occasions. Physical gold can also be converted into cash whenever the need arises. However, gold purchased from banks could be hard to sell, because banks would not buyback gold, as they are not allowed to trade in bullion.
Some of the disadvantages of holding physical gold are that it involves storage as well as an insurance cost and one needs to be careful about the purity while buying for jewellers.
Gold can also be bought in easy electronic form through ETFs or the e-gold product from NSEL. E-gold allows you to buy gold in smaller denomination such as 1, 2 or 3 gm. The transacting pattern of this product is similar to the cash segment of the equity markets, where the e-Gold bought by you will be settled on a T+2 basis (that is, trading day + 2 days).
The advantages of buying gold through ETFs are that the purity is assured and there is transparency in pricing, while you need not spend on storage, expect for the brokerage charges.
Buying gold in electronic form is always a better choice because of the easiness and transparency in pricing. In physical form you are always subject to a number of charges while buying or selling. Even if you are buying gold for consumption purpose, it is better to invest in ETFs and sell them when needed and buy jewellery.
The cost of buying is low in ETFs when compared with physical form and also ETFs provide the opportunity of earning dividends as well.
