Gold glitters on the auspicious day of Akshaya Tritiya as demand for the yellow metal rises. The festival which is being celebrated on Saturday witnesses one of the biggest buying in gold and jewelleries in India. On this day, jewellers will be giving lucrative discounts and offer to customers. But gold prices have risen sharply since last year, and are currently near ₹60,000 mark making it expensive for everyone to buy. In such cases, a digital alternative to physical gold could become an appealing option for investment.
Pritam Patnaik, Head – Of commodities, HNI & NRI Acquisitions said, “We anticipate that this Akshaya Tritiya will be as lively as ever, but the traditional practice of purchasing physical gold may be subdued due to soaring gold prices, currently quoted at over Rs. 60,000/- per 10 gms, making it challenging for potential investors. We expect symbolic buying to continue, but the quantum may taper.”
But Patnaik also said, “Those looking for other gold-related instruments can opt for Gold ETFs.”
Gold ETFs are a virtual option for investment in place of the yellow metal as they do track the domestic physical gold price.
WindMill Capital recently cited MCX data, which revealed that gold prices have moved up over 20% to ₹60,800 as on April 13, 2023, from ₹50, 800 as on May 3, 2022 (Akshaya Tritiya, 2022).
Gopal Kavalireddi, Head of Research at FYERS explains the differences between physical gold and gold ETF. These are:
In India, gold has always played a significant role in the country’s culture, and Indians have exhibited an appreciation for the yellow metal for many reasons. Traditionally, gold has been a preferred investment during auspicious occasions. But with significant investor interest, Gold ETFs also have become an attractive investment avenue. Both physical gold and gold ETFs have their advantages and disadvantages. Though physical gold has a high emotional and cultural value, preferred during auspicious occasions, it also requires storage and safety arrangements, with concerns about its purity and making charges.
On the other hand, gold ETFs are convenient and cost-effective, as they trade on stock exchanges like any company’s share, without storage or safety concerns. Moreover, gold ETFs provide liquidity without any lock-in period or exit loads, making it an attractive investment option for short-term investors. However, gold ETFs do not have the same emotional and cultural value as physical gold, and there may be concerns about the quality or quantity of gold held by the ETF.
Also, in the case of gold ETF, WindMill’s note pointed out that this investment mechanism is preferred over purchasing gold in physical forms like jewelry, coins, and bars. It can be either dematerialised or traded in paper form just like regular funds on the stock exchange. They are purchased and sold at the same rate across India, giving them an edge over physical jewelry. There is complete transparency in prices, and these funds can be traded at any time through a broker from any location. The investor doesn’t have to worry about storage, pay locker fees, and worry about safety issues as they hold these funds through Demat.
Lastly, Kavalireddi concluced, “Ultimately it depends on the individual investor’s preferences and investment goals as to whether they should invest in physical gold or gold ETFs.”
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.