Things To Consider Before Investing In Physical Gold Or Digital Gold, Gold, physical gold, digital gold, sovereign gold bonds, investment, upstox
Gold has always been a good source of investment for the long term. However, there is always the risk of carrying physical gold for which the investors have an option of digital gold and sovereign gold bonds.
The 24 karat per 10 gram in 1970 was ₹184, in 1980 was ₹1,330, in 1990 was ₹3,200, in 2000 was ₹4,400, in 2010 was ₹18,500, and in 2020 was ₹48,651. This shows that there have been drastic increases in the prices in the last 50 years by 260 times.
If you would have invested ₹1,00,000 in 2010, the current value could have been more than ₹2,75,000.
Gold is a precious metal which is the reason its value appreciates. The researchers predict that the value will touch 60,000 in the next 12 to 15 months.
Indian people have the mentality of investing in gold due to its ever-appreciating property. Even our ancestors tend to buy gold whenever they had extra money left after deducting all the household and personal expenses.
There are certain restrictions imposed by the government in carrying physical gold. A married woman can have up to 500 grams of physical gold, a bachelorette can have up to 250 grams of gold and a male can have up to 100 grams of gold, even if there is no documentary proof of income or purchase of gold. Physical gold accidents the above limit can result in gold owners paying 78% taxes and a 10% penalty.
Sovereign gold bonds
To avoid this penalty, the government has introduced sovereign gold bonds that are released by the Reserve Bank of India from time to time. There is an additional benefit of 2.5% per annum interest. These gold bonds can be purchased through a demat account or from the banks listed under RBI. There is a lock-in period of 8 years, but an investor can exit from it after 5 years on the date of interest payment.
If you have purchased sovereign gold bonds of ₹1,00,000 in 2010, then the current value would have been more than ₹2,75,000 plus an interest earned ₹30,000.
There is another option of digital gold provided by the brokerage houses like Upstox. The gold is maintained in digital form in the demat account of an account holder. It is similar to physical gold. The only difference is that physical gold has made charges but in digital gold, there are buying charges imposed by brokers. However, there are certain charges imposed on buying and selling of digital gold which is around 0.03%.
Based on the pros and cons of all the options, you can decide the best out of the three.
Frequently asked questions
Is there any limit of purchase on sovereign gold bonds?
Yes, an individual buyer can hold a minimum of 1 gram and a maximum of 4 kgs each year. Check the link, for more details.
Should I maintain documentary proof of physical gold at my home?
The proof is not required if it is within the specified limit.
Disclaimer: This article is for knowledge only. You have to do your own research before making a final investment decision.
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