Gold is considered one of the favourite investment instruments worldwide because of its liquidity, value appreciation, diversification tool, and hedging ability against market downturns. Gold instruments protect against inflation and market volatility. It is also considered in retirement planning if the portfolio needs fixed-income assets for stability. These are some of the primary reasons people hold gold in their portfolios.

Here are a few things you should consider before investing in gold:

Risk: Before making gold investments, consider your investment capacity and available gold instruments in the market.

Storage:  When investing in physical gold, ensure a secure place to store it. If it is digital gold, there is no storage concern.

Liquidity:  Although physical gold is relatively liquid, investments like Sovereign Gold Bonds have a 5-8-year lock-in, making them illiquid.

Options: Today, the market has various gold investment options, such as physical gold, which can be bullions, coins, jewellery bars, etc., or products like gold ETFs and SGBs.

Chose a gold investment instrument based on your requirements:

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Gold Bullions: It is the most liquid form of gold, which includes coins and bars. Local retailers buy gold based on the metal’s purity, such as 14K and 22K, weight, etc., and the MMTC logo for authenticity. Heavy gold ingots, like 400 troy ounces, are less liquid than bars and coins. Due to their high cost, ingots are unsuitable for sale to local or neighbourhood jewellers.

Gold Jewellery: Indians invest a lot in gold jewellery. Individuals preserve money by investing in gold jewellery for emergencies. However, it is so liquid. Gold jewellery is made of different metals, like titanium, copper, nickel, iron, zinc, tin, manganese, cadmium, and silver, which can reduce gold purity while enhancing the jewellery’s durability.

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Sovereign Gold Bonds: SGBs are government securities measured in grams of gold and issued by the Reserve Bank of India (RBI) on behalf of the Indian government. Investors pay the issue price in cash. SGBs, being a digital investment, eliminate the need to store in physical form, which makes it safe. Eligible investors include individuals, HUFs, trusts, universities and charitable institutions. SGBs may incur losses as the price of gold fluctuates. It allows joint holding as well as premature withdrawals.

Gold ETFs: Gold ETF (exchange-traded funds) units are equivalent to 1 gram of gold and are traded on the stock exchanges, offering ease of investment and flexibility. Gold ETFs are listed and traded on the NSE and BSE and can be bought and sold at market prices. These are easy to manage and can be purchased through a demat account.