Every Indian family has gold. Weddings, festivals, “just in case” money, the locker at the bank with jewellery nobody wears. Gold runs deep in our culture.

But is gold a good investment? And if yes, should you buy it as jewellery, a coin, or something else entirely?

Why gold belongs in your portfolio

Gold isn’t for getting rich. It’s for not getting poorer during bad times.

When stocks crash (2008, 2020, 2022), gold usually holds steady or goes up. When inflation eats into your rupee’s value, gold tends to keep pace. It’s the seatbelt in your investment car: useless until you need it, and then it saves you.

Historical returns: gold has delivered roughly 8-10% annually over the last 20 years in India. That’s lower than equity (12-14%) but higher than FDs after adjusting for inflation.

Gold won’t build your wealth. Equity does that (start with index funds for that). Gold protects what you’ve already built.

The problem with physical gold

Most Indians “invest” in gold by buying jewellery. This is a terrible way to do it.

Making charges: A jeweller charges 10-25% as making charges. You buy ₹1 lakh of gold jewellery, and ₹10,000-25,000 goes to the craftsman’s labour. That money is gone on day one.

Selling loss: When you sell jewellery back, the jeweller won’t pay you for making charges. They also deduct 5-10% for “wastage.” Your ₹1 lakh necklace might sell for ₹70,000-80,000.

Storage and safety: Lockers cost money. Keeping gold at home is risky. Insurance costs extra.

Purity risk: Unless it’s BIS hallmarked, you don’t know if it’s actually 22 karat or 18 karat with a 22K stamp.

Jewellery is for wearing. It’s not an investment. Keep these separate in your head.

Better ways to invest in gold

Gold ETFs

Exchange-traded funds (what is an ETF?) that track gold prices. Each unit represents roughly 1 gram of gold.

• Need a demat account
• Buy/sell like a stock on the exchange, in whole units at the market price
• You buy one unit or more, so you can’t invest an arbitrary small amount like ₹100
• Expense ratio: 0.5-1%
• No making charges, no storage
• Highly liquid during market hours

Who should buy: People who already have a demat account and want flexibility to buy/sell anytime.

Gold mutual funds

These are fund-of-funds that invest in gold ETFs. One extra layer.

• No demat account needed
• Available on Groww, Kuvera, Zerodha like any mutual fund
• Invest any rupee amount (even ₹100), you get fractional units
• SIP possible (buy gold in small amounts every month)
• Expense ratio is slightly higher than gold ETFs (double layer of fees)

Who should buy: Most people. Easiest to buy, SIP-friendly, no special accounts needed.

Sovereign Gold Bonds (SGBs)

Once the best gold investment in India, but you can NO longer buy them fresh.

• Issued by RBI on behalf of the government
• You get the gold price appreciation PLUS 2.5% annual interest
• No capital gains tax if held till maturity (8 years)
• No storage risk, no purity concerns
• Can exit after 5 years on interest payment dates
• Can be traded on stock exchanges (though liquidity is low)

The catch: The government stopped issuing new SGB tranches after February 2024, and the Union Budget 2025 confirmed no immediate plans to bring them back (they got too expensive for the government as gold prices climbed). RBI no longer sells them fresh. Existing holders keep every benefit, and you can still buy old tranches on the secondary market (NSE/BSE), but liquidity is thin and they often trade at a premium.

Who should buy: If you already hold SGBs, keep them to maturity for the tax-free exit. New buyers can’t get them fresh, so a gold ETF or gold mutual fund is the practical route today.

Want the full story of what SGBs are and why the government launched (and then stopped) them? Read What Are Sovereign Gold Bonds? (coming soon).

Digital gold (PhonePe, Paytm, Google Pay)

Apps sell you “digital gold” in small amounts. Technically you own gold stored in a vault by MMTC-PAMP or SafeGold.

• Convenient for tiny purchases (₹100 at a time)
• But: higher buy/sell spread (3-5%), no SEBI regulation
• Fine for buying small amounts occasionally, but not for building a serious gold holding

Comparison at a glance

	Physical	Gold ETF	Gold MF	SGB*	Digital Gold
Demat needed	No	Yes	No	Optional	No
SIP possible	No	No	Yes	No	Yes
Making charges	10-25%	0	0	0	0
Extra interest	No	No	No	2.5% p.a.	No
Lock-in	No	No	No	5-8 years	No
Tax on maturity	Slab rate	Slab rate	Slab rate	Zero	Slab rate
Expense/spread	High	0.5-1%	0.7-1.2%	None	3-5%
Best for	Wearing	Active traders	Easy SIP	Long-term hold	Casual/small

*SGBs are no longer issued fresh (since February 2024). Only existing tranches trade on the secondary market.

How much gold should you have?

5-10% of your total portfolio. Not more.

Gold doesn’t produce anything. It doesn’t pay dividends. It doesn’t generate earnings. It just sits there and (hopefully) holds value against inflation. Beyond 10%, you’re sacrificing real growth from equity for the comfort of a shiny metal.

If you already own gold jewellery, count its market value as part of your gold allocation. Many Indian families already have 15-20% of their net worth in gold without realising it. You might not need to buy any more.

Tax on gold investments

Type	Holding period	Tax
Physical gold, ETFs, gold MFs	Any	Income tax slab rate
SGBs (held till maturity)	8 years	Zero tax
SGBs (sold before maturity)	< 3 years: slab rate; > 3 years: slab rate (indexed)	Indexation removed post-2023 budget

SGBs are the only gold investment with zero tax on gains at maturity. That made them the top choice for long-term gold, but with fresh issuance stopped, the benefit now applies only to existing holders.

Key takeaways