Gold has appreciated by about one-third so far in 2020. Typically considered a hedge against inflation, gold shares an inverse relationship with equities, rising when investors move away from riskier instruments such as stocks. Times of uncertainty provide support to the yellow metal’s appeal as a safe haven. Wealth advisers often emphasize on the need for investors to accumulate gold in demat form, wherein the buyer never holds gold in physical form such as jeweery, bars or coins. Non-physical gold concentrates the investment on the intrinsic value of gold, avoiding costs such as making charges, which is the portion of money paid to a jewellery for giving shape to a piece of jewellery.
Here are few ways of investing your money in non-physical gold:
Gold Exchange-Traded Funds (ETFs)
Gold exchange-traded funds invest in physical gold, and are traded in the same way as equities on stock exchanges. Investors need to have a demat account and a trading account to deal in gold ETFs, which invest in gold of 99.5 per cent purity.
The majority of your investment goes into physical gold and the remainder into debt Instruments.
Gold funds invest in the shares of companies operating in gold and allied services. Unlike gold ETFs, gold funds are managed by fund managers, in a similar fashion as mutual funds.
Gold mutual funds are ideal for risk-averse investors as they work on the principle of diversification.
Gold Fund Of Funds
Also known as gold saving funds, these are mutual funds that invest in gold ETFs. Experts consider gold fund of funds for their investor-friendliness, an alternative for those who do not want to deal in gold ETFs. Investors do not require a demat account to be able to invest in gold fund of funds.
Gold Mining Shares
Shares in gold mining companies are available in secondary equity markets. Their prices reflect changes in gold benchmarks.
Sovereign Gold Bonds (SGBs)
Issued by the Reserve Bank of India on behalf of Government of India, these are bonds linked to the current value of the yellow metal. These bonds have a tenure of eight years, with an exit option after the first five years.
If you are planning to purchase sovereign gold bonds this Dhanteras, Friday is the last day to do so. The SGBs will be available for subscription next for five days four times till March after the current tranche.
Gold futures and options derivates contracts are available on Multi Commodity Exchange (MCX). These are just like any other derivatives contracts with the market price of gold as underlying asset.