Even amid the rising inflation, gold has held its ground. An analysis of the rate of growth in the price of gold over the last 15 years shows that the asset promises an annualised return of 12.5 percent, much higher compared to the 6.01 percent retail inflation in India as reported in January.

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Therefore, gold has not only become a hedge against inflation but also a safe way out for an average investor in India, especially in the wake of uncertainties of investment in stocks, shares, bonds and cryptocurrency. In fact, the Centre, in consultation with the Reserve Bank of India (RBI), will open Sovereign Gold Bonds (SGBs) for subscription from February 28 to March 4. This will be the fourth issuance of SGBs since October 2021.

Also read: Should you buy gold now? How analysts are viewing the Ukraine-Russia conflict

In the last few years, Indians have not just bought physical gold but have also invested in digital gold. With the rise of third party apps, one can place an order for digital gold in just a few clicks.

As per procedure, when you place an order for digital gold, they buy the corresponding amount of gold and place it in a vault on your behalf. Similarly, when you sell the digital gold, the third party agent sells the physical gold stored in your name. The proceeds of this sale are then transferred into your account.

Also read: Commodities round-up: Gold at 9-month high

Here are the best ways to invest in the yellow metal:

Physical gold

Old school investors are comforted with the fact that when they put their money in gold, they can physically view the investment they have made. Investing in physical gold has also been a preferred option for those who do not have enough confidence in financial markets. It is an incredibly straightforward investment and does not take a broker or a financial analyst.

Also read: Explainer: Why gold prices are up near 8-month high

SGBs

When you buy Sovereign Gold Bonds, you don't actually get gold in its physical form but a holding certificate of the corresponding quantity of gold that you have bought. While these bonds mature in eight years, an investor is provided with an exit option after the first five years.

The best part of SGBs is that the capital gains arising on its redemption are exempted from tax. Besides, these bonds are tradable on stock exchanges and transferable by the execution of an instrument of transfer. As mentioned earlier, you can buy SGBs between February 28 and March 4.

Check here for more details on SGBs.

Gold ETFs

Gold ETFs invest inphysical gold of 99.5 percent purity. They are traded in a way similar to how equities are traded on stock exchanges. The major benefits of gold ETFs include: The certainty of return on investment, no fear of theft, no making charges, no locker expenses, no wealth tax and they be used as security collateral in case you wish to seek a loan from a financial institution.

Also read: A glance at digital gold adoption in 2022

Gold funds

For risk-averse investors, gold funds are a great investment option. Unlike gold ETFs, gold funds are managed by fund managers, who invest in the shares of companies operating in gold and allied services. You can think of gold funds as a substitute for mutual funds as the former is regulated by SEBI. Capital gains from investment in gold funds are also exempted from tax. Gold funds can also be liquidated at a short notice without much hassle.

Also read: Mutual Fund Corner: Experts answer queries on ESG funds, gold ETF

Gold mining shares

As the name suggests, this is an investment ingold mining companies. Such shares are available in secondary equity markets. Buying stocks of gold mining companies is considered a smarter choice than buying physical gold as these shares appreciate many times faster than physical gold.

Gold derivatives

These are agreements based on the speculation of the future cost of gold and considering that gold rates are among the most stable in the world, gold derivatives are an excellent way to hedge your investments. However, while gold derivatives act as insurance of sorts, they do not guarantee against market fluctuations that affect both the buyer and the seller.

Also read: Expect gold prices to remain volatile till Fed rate hike: Metals Focus

(Edited by : Shoma Bhattacharjee)

First Published:Feb 21, 2022 6:49 PM IST