How & Where To Invest In Gold This Gudi Padwa

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Gudi Padwa, which marks the beginning of the Hindu New Year, will be celebrated in Maharashtra on March 28, this year. Celebrated on the first day of the Chaitra month in the Hindu calendar, this festival is also celebrated in Andhra Pradesh and Karnataka as Ugadi and marks the beginning of the spring season.

Gudi Padwa is considered as an auspicious occasion for buying gold. According to Hindu mythology, buying gold on this day ensures a lot of prosperity in the house the year round.

While buying gold may be an integral part of celebrating this festival, most buyers are still faced with the fundamental question: where to buy the gold from and in what form? Mind you, the options are plentiful ranging from physical gold to gold ETFs to investing in a gold bond scheme for the risk averse.

Here’s a closer look at each one of them to help you choose the right option for yourself.

Physical Purchase: One of the most popular options which involves making a trip to your nearest retailer to buy gold in the form of coins, bars or finished gold jewellery. The obvious advantage here is the liquidity it provides and the chance of price appreciation if held long enough.

The catch here is that in the case of finished gold jewellery, making charges will be factored into the final price. Then there is a high risk of possible theft if kept at home and incurring locker charges if deposited in a bank for safety. 

Also as per new government regulations in case of high-value purchase (INR 2 lakhs & above), it is now mandatory to furnish your PAN Card details & identity proof.  

Sovereign Gold Coins: Sold by MMTC, the agency also has tie-ups with several leading banks like ICICI Bank, HDFC, Vijaya Bank, Indian Overseas Bank, Yes Bank  and Federal Bank for distribution convenience specially for NRI customers. Featuring the Ashok Chakra on one side and the image of Mahatma Gandhi on the other, these coins are available in 5, 10 gms and a 20 gm gold bar.

For the domestic market, MMTC has a tie up with approx 383 bank branches to sell these coins. For the customer, easy liquidity is assured given the assurance provided by MMTC to repurchase the Indian gold coin in its tamper-proof packing with its original invoice at the prevailing gold base rate with zero deductions.           

Gold Funds: Or Gold ETFs (Gold Exchange-Traded Funds) are like any other mutual fund investment wherein the money is invested to purchase actual gold and the investor is offered units equivalent to the exact value at the prevailing gold price.

ETFs offer an affordable option since even small purchases (from one gram-onwards) are allowed. Buyers also have the advantage of being able to increase their holdings vide regular investments.

Also there is no chance of incurring a loss due to theft and price transparency is assured since the units are traded on exchanges. However opening a demat account could involve paying a brokerage/commission starting from approx 0.25%. Further the introduction of Sovereign Gold Bonds has greatly reduced the investment potential of such gold ETFs.     

Gold Bond Scheme: Instituted by the central government to offer buyers and investors a safer substitute to buying physical gold, these bonds are issued by the RBI from time to time. They are available in both paper and demat form and denominated in grams (of gold) on payment of the said amount.

On the plus side, these Government of India bonds have a sovereign guarantee and offer fixed returns which are exempt from capital gains tax. What’s more the buyer also saves on storage costs and makes a risk-free investment.  As an added incentive, the buyer is also assured of getting the prevailing value of gold at the time of maturity. These bonds can also be used as collateral for a bank loan.

However the maximum investment permitted by an individual cannot exceed 500 grams per person per fiscal year. The bonds have a eight-year duration with a exit option only from the fifth year which makes liquidity an issue.

Now that you know all about the options you have when it comes to buying gold this Gudi Padwa and the accompanying advantages and disadvantages associated with each, go right ahead and take your pick. Here’s wishing you a very happy Gudi Padwa / Ugadi & a prosperous New Year ahead.

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How & Where To Invest In Gold This Gudi Padwa

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