Gold has long held significance for Indian investors—whether as jewellery, as a store for value, or as part of an investment portfolio. In 2025, while gold’s appeal remains strong, the methods of investing in it have evolved. Alongside traditional physical gold, investors now have options like Gold Exchange Traded Funds (ETFs) and Sovereign Gold Bonds (SGBs) as well.
With these choices available, how are investors approaching gold today? Let’s explore each option and understand the factors that may influence investment decisions.
Why Do People Still Invest in Gold?
Historically, Gold has been considered by many as a potential safeguard during times of economic uncertainty due to its generally inverse relation to equity and as a way to balance investment portfolios. In India, gold also has cultural relevance, often associated with festivals, weddings, and long-term savings.
Top 3 reasons investors look to invest in gold:
- Potential diversification across asset classes.
- Its traditional role in wealth preservation.
- Cultural significance and personal preferences.
However, over time the ways in which investors choose to hold gold have undergone a sea change.
Physical Gold: Tradition Meets Tangibility
What It Offers
Physical gold—whether in the form of jewellery, coins, or bars—continues to be valued by many for personal use and as a tangible asset. For some, owning physical gold provides a sense of security and the satisfaction of holding a real, physical item.
Points to Consider
- Storage and safety: Secure storage arrangements such as lockers at home or banks adds to overall costs.
- Cost of Purchase: Jewellery purchases often involves additional charges that may not be recovered if sold later.
- Purity and resale considerations: Verifying purity and getting fair value on resale can be factors to keep in mind.
Physical gold may be preferred by those who prioritize tradition and the utility of gold in personal and cultural practices.
Gold ETFs: Convenient and Digital
Gold ETFs offer a way to invest in gold digitally without the need to hold it physically. These funds typically invest in gold of standardized purity and are traded on stock exchanges, providing investors an opportunity to gain exposure to gold prices in a convenient way.
Key Features
- No physical storage needed: Units are held electronically in a demat account, reducing concerns about theft or damage.
- Liquidity: Investors can buy or sell units during exchange trading hours, providing flexibility.
- Purity assurance: ETFs generally reflect gold of a defined purity, as per regulatory standards.
- Small ticket sizes: Investors can start with relatively small amounts, making it accessible.
Points to Keep in Mind
- Demat account required: A demat and trading account is necessary to invest.
- Expenses: An expense ratio is applicable, which covers fund management and other operational costs.
- Market-linked prices: The value of units can fluctuate based on market conditions and gold prices.
Gold ETFs are often considered by investors who seek convenience and prefer holding gold in a digital format.
Sovereign Gold Bonds (SGBs): Government-Backed with Additional Income Benefit
SGBs are issued by the Government of India as a substitute for holding physical gold. They offer investors exposure to gold prices along with the benefit of earning a fixed interest income.
Key Features
- Interest income: SGBs offer a fixed annual interest, payable semi-annually, which is over and above the potential appreciation in gold prices.
- No storage concerns: Bonds are held electronically or in paper form, eliminating the need for physical storage.
- Tax considerations: Capital gains on redemption at maturity are exempt from tax, subject to terms and conditions.
- Government issuance: Issued by the Reserve Bank of India on behalf of the Government of India.
Points to Keep in Mind
- Tenure: SGBs have an 8-year term, with an option to exit after 5 years through the secondary market.
- Liquidity: While they can be traded on exchanges, liquidity may vary depending on market demand.
- Investment limits: There is a cap on the maximum quantity an individual can invest in each financial year.
SGBs may appeal to investors with a long-term horizon who are comfortable with the holding period and interested in the additional interest payout.
The decision on which form of gold investment to choose often depends on factors such as liquidity needs, investment tenure, convenience, and personal preferences.
To Sum It Up
Gold continues to hold a place in many investors’ portfolios in 2025. However, the choice between physical gold, Gold ETFs, and SGBs depends on individual goals, time horizons, and preferences. Whether for diversification, cultural reasons, or as part of a long-term financial plan, understanding the options can help investors make informed decisions.
Thinking of adding gold to your portfolio this year? Consider your options carefully to make an informed decision.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.