Indian weddings have been synonymous with gold for decades now. Although the form, type, and practices of an Indian wedding have changed with time, the commonality that has stayed through is the presence of gold. It is interesting to note how gold has been the go-to gift or a gesture of love for newlyweds. Even with changing times, the importance of gold in an Indian marriage cannot be understated.
The Gold Market
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It is helpful to understand the gold market in India before getting into the specifics of gold schemes for weddings. India is considered one of the world’s highest gold markets with a considerable growth rate today. The gold industry contributes to about 1.3% of India’s annual GDP. The industry is still highly fragmented with artisans, local players, and independent retailers dominating the landscape.
However, the last few years have seen some consolidation with national and regional chain stores grabbing a more significant market share. These chain stores are entering Tier-2 and Tier-3 cities to tap into the aspirational demand of these places. Gold companies and brands are now offering several innovative ways for consumers to gain the best returns on their gold purchases.
Gold Monetization: Purchasing Gold As an Investment
Investment in gold has been one of India’s most sound financial instruments. Its unique ability to act as a robust store of value has made it a desirable investment option across generations. If invested cleverly, the returns from gold could be significant. Due to the volatility of the market and the dynamic nature of gold prices, there is always some hesitation in purchasing gold directly as a one-time purchase.
Instead, people prefer to invest in gold in installments. This has led to several retailers and gold companies’ emergence of gold schemes and investment options. Let’s look at a few ways of investing in gold to maximise returns.
Physical Gold
The first and most conventional way is to invest in physical gold. This is a time-tested method, where you can purchase gold as jewellery or as bars. This option does not include any additional charges other than the price of the physical gold itself. However, it faces the storage problem and the risk associated with burglary. Further, this investment tool is also directly affected by market fluctuations in the price of gold.
This may not be desirable for investors in a highly volatile global gold market with increasing inflation. The absence of a Systematic Investment Plan (SIP) in this option further discourages modern investors; hence, the need for other robust investment tools emerges.
Exchange Traded Funds (ETF)
Gold schemes overcome many of these hurdles to make gold monetization a viable option. A lucrative investment option for gold is a gold exchange-traded fund or a gold ETF. This is a passive investment instrument that proportionately represents physical gold. Listed and traded on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), this is similar to buying and trading in a regular stock. Users need a demat account and will need to undertake brokerage fees to enable this trading.
In essence, buying a gold ETF is equivalent to purchasing gold electronically. If you wish to redeem the ETF, they can simply be sold on the stock exchange at the domestic market price. This investment holds much more transparency and saves customers from the hassle of holding physical gold. A gold ETF can also provide tax benefits and is a tax-efficient way to hold your gold.
That being said, it is important to note that holding and trading in a gold ETF requires dedicated time and knowledge, a demat account, and brokerage facilities to yield good returns.
Gold Funds
Another novel way to invest in gold is the use of gold funds. These are stocks of companies that operate in gold and gold-related activities. This is undertaken as a regular mutual fund investment wherein an asset management company handles the gold fund. Their job is to study the market and maximise gains for their investors. The returns on a gold mutual fund depend on, to some extent, the conditions of the market itself.
What makes them attractive is that gold funds are distributed over a wide range of investment options. By not putting all eggs in one basket, this tool becomes a lucrative and stable source of income for its investors.
Sovereign Gold Bonds
Sovereign gold bonds are an effective and stable source that gold investors can consider. Issued by the Reserve Bank of India, this tool carries the security of being a Government of India investment tool. They are available in multiples of 1 gram, and a single investor can hold up to 4 kg of sovereign gold bonds. With an eight-year tenure, these bonds can provide 2.5% interest on the initial investment.
This is a highly suitable option for investors investing in a gold monetization scheme. Like other gold-based instruments, these bonds are bought and sold on the stock exchanges.
Digital Gold
Lastly, a new form of gold investment is emerging through digital gold. This is an attempt to digitise the sale and possession of gold-based instruments as India moves towards being an entirely cashless economy. Digital gold is issued by Metals and Minerals Trading Corporation (MMTC) of India. This form of gold can easily be accessed through the foray of digital wallet platforms in India.
Concluding Remarks
The different forms and tools for gold investment mentioned above have varying degrees of suitability depending on what you, as an investor, are looking for. Although investing in gold requires adequate knowledge of the market and its risks, this is a lucrative investment. During the wedding season, especially, a lot of interest in and around gold schemes is seen among Indian families.
National and regional chain stores in the country have also started offering gold schemes to their customers. Well-known gold brands like Tanishq and Joyalukas are also adopting this method. While Tanishq has a Golden Harvest Scheme, Joyalukkas has its trademark Joyalukkas gold scheme. More and more customers are moving towards this form of investment as they see greater value in such instruments.
To sum it up, whichever gold scheme you choose for the wedding season, you can rest assured knowing that you will find good value for your money. Get more interesting ideas and informative tips here with Quintdaily.
