Is gold investment scheme good?


My local jewel is offering a gold investment scheme. Provided I trust the jeweler with my gold and money what are the other things I need to watch out for?


All such gold saving schemes offered by jewelers basically work like a bank recurring deposit. You as a buyer deposit a fixed sum every month with the jeweler for a certain period. At the end of the tenure period the buyer gets to shop for one or two installments more than the sum deposited with the jeweler. The big problem with such a scheme is that is usually comes with no Liquidity option. Only Jewelry can be purchased as a return with making charges applicable.


Hi Mahesh,

If you are looking to invest in gold, a gold investment scheme offered by a jeweller may not be a great idea. Investment in physical gold is highly susceptible to theft and burglary. However, if you invest in an ETF or gold bonds, then you can keep the investment safe. Physical gold requires careful handling and is unsafe when kept at home. ETF and gold bonds are kept in dematerialised form and held in a demat account, therefore it is very safe and easy to handle.

If you hold physical gold, ETF or gold bonds for more than 3 years, then it is considered a long-term holding and becomes eligible for long-term capital gain (LTCG) at 20% with indexation. Selling before 3 years is considered a short-term capital gain (STCG) and the gain is taxed as per the applicable slab rate of the individual. However, gold bonds allow one more advantage on the tax front. If you hold it until maturity and redeem it after its maturity period, then the complete gain is tax exempt.

The rates of ETF and gold bonds are linked to physical gold rates. So, the capital appreciation benefit of all the three investment products are the same. However, in addition to capital gain benefits, gold bonds also offers interest at 2.5% p.a. on the invested value to its investors. So, if you are investing for a very long period, then 2.5% p.a. interest can make a big difference to the overall return.

Not interested in gold bonds? How about Mutual Funds? Click here to explore funds.

BB Expert