Physical Gold vs Gold ETF vs Digital Gold vs Gold Bonds

Owning gold used to mean one thing: buying jewellery or a coin and keeping it safe. Today there are five common ways to hold it, and they differ more in cost, convenience and risk than in the gold itself. This guide compares them so you can match the option to your reason for buying.

Start with the purpose

If you want to wear or gift gold, you need jewellery. If you want to hold gold as part of your savings, the other four usually cost less to buy and sell. Mixing the two goals is where people overpay: buying heavy jewellery as an investment means paying making charges that you will rarely recover.

The five options

1. Jewellery

You get something you can use, and it carries sentimental and wedding value. The cost is the making charge, any wastage the jeweller adds, and GST. When you sell, you are paid for the gold content, so the making charge is usually lost. Storage and insurance are your responsibility.

2. Coins and bars

These carry a small premium over the gold rate and far lower making costs than jewellery. Buy from a reputable seller, keep the sealed pack and certificate, and ask about buy-back terms. They are easiest to sell back to the seller you bought from.

3. Gold ETFs and gold funds

These are units that track the domestic gold price. Gold ETFs trade on the stock exchange and need a demat account. Gold funds that invest in ETFs can be bought without one. You pay fund expenses and, for ETFs, brokerage, but there are no making charges and no purity worries. Gold stays with the fund, so you do not need to store anything.

4. Digital gold

Offered through apps and payment platforms, it lets you buy small amounts, even a few hundred rupees at a time. The provider holds the physical gold for you. It is sold by private platforms and is not an exchange-traded product, so look carefully at who holds the gold, how often it is audited, and what the gap between the buying and selling price is. GST applies on purchase.

5. Sovereign Gold Bonds (SGBs)

These are government securities denominated in grams of gold. Past issues paid a fixed interest on top of any rise or fall in the gold price, and had a long maturity with an early-exit option after some years. Whether new issues are open depends on the government's schedule, so check RBI announcements. Existing bonds can be bought and sold on the exchange, where the market price may be above or below the gold price.

Side by side

Questions to ask before you choose

• Do I want to wear it, or hold it?
• How long can I leave the money untouched?
• What will it cost me to get out, not just to get in?
• Who is responsible for safekeeping, and what protects me if something goes wrong?
• How will gains be taxed? Rules depend on the product and the holding period and they change, so check the current rules or ask a tax adviser.

Frequently asked questions