Gold, the “ultimate safe haven” asset, continues to be one of the most trusted investment options, especially during times of economic uncertainty and global turmoil. It also plays an important role as a portfolio diversifier and a hedge against market volatility, inflation, and geopolitical risks.
In the past few years, the yellow metal has stolen the spotlight. Gold prices have touched record highs globally, delivered double-digit returns and outperformed all major asset classes.
From FY 2024 to FY 2025, gold generated a ~29% return over the one-year period. (Source: MCX Gold Spot Market Price)
In fact, in 2025, gold prices in India made history; it crossed the ₹1 lakh (per 10 g) mark for the first time ever in August 2025. Over the calendar year, gold delivered an exceptional return of ~74%, rising from ₹76,244 at the start of the year to ₹132,640 by year-end. (Source: MCX Gold Spot Market Price)
With gold reaffirming its status as a resilient asset and a powerful portfolio diversifier, let’s explore the different gold investment options far beyond just jewellery or coins.
Gold mutual funds are a type of mutual fund scheme that gives investors the exposure to the gold price without actually holding physical gold; that too at a fraction of the amount required to invest in physical gold.
One can start investing in gold mutual funds with as low as a ₹500 SIP.
In India, almost all gold mutual funds are FoFs (fund of funds).
Your money (which you invest in a gold mutual fund through SIP or lump sum)
↓
Gold FoF (the invested money in Gold FoF will be used by the fund manager to buy units of the fund’s holding, i.e., gold ETF)
↓
Gold ETF (these gold ETFs, in turn, buys and hold physical gold of 99.5% purity stored in secure vaults)
How does the value of a gold mutual fund change?
In simple terms, when you invest in a gold mutual fund, someone else (the fund manager) will buy and hold gold on your behalf in exchange for a fee (expense ratio).
Gold ETFs represent physical gold in electronic format. In simple terms,
Gold ETFs are a way of investing in pure gold in digital form with as little as ₹10.
Just like stocks, Gold ETFs are market-linked and are traded on stock exchanges, NSE and BSE. So, ETF units can be bought or sold at any time during market hours through a demat account.
How do gold ETFs work?
Gold ETFs are backed by actual physical gold, which is stored in secure, insured vaults. Each unit of a gold ETF represents one gram of gold bullion with 99.5% purity.
The price of a Gold ETF closely follows the domestic price of gold. As gold prices rise or fall, the value of the ETF units moves in the same direction, minus a small expense ratio charged by the fund house.
Physical gold (gold bars, coins, and jewellery) is the most traditional and widely recognised form of gold investment.
Whenever thinking of investing in gold, the first thought that comes to mind for most people is getting a jewellery piece or a gold coin or bar.
The reason seems to be apt.
Jewellery, in particular, feels like a dual-purpose purchase; you get to wear it while also considering it an investment.
If you’re looking towards physical gold as a tangible security and emotional value, then no-brainer, it’s a straightforward choice.
However, if you’re considering physical gold purely as an investment, there are a few important factors to consider.
The next form of gold investment is digital gold. It has gained popularity in recent years due to its ease of access and low entry barrier. Investors can start investing with just ₹1 and buy gold online in just a few clicks.
But before you think about investing in digital gold, one important point to note is:
On November 8, 2025, SEBI issued a warning, stating that digital gold products operate entirely outside the purview of SEBI and are not regulated by SEBI or RBI.
When you buy digital gold from third-party platforms like Jar, Gullak, etc., an equivalent amount of physical gold is purchased and stored securely in insured vaults by a custodian. The value of investment moves in line with real-time gold prices.
However, since digital gold is not a regulated investment product, it comes with certain counterparty and operational risks.
Sovereign Gold Bonds are government-backed securities issued by the Reserve Bank of India (RBI) on behalf of the Government of India. They are linked to the market price of gold.
SGBs are denominated in grams of gold. Investors benefit from gold price appreciation along with a fixed interest of 2.5% per annum, paid semi-annually.
Gold falls under the category of "Specified Mutual Funds" (i.e., non-equity oriented mutual funds).
|
Investment Avenue |
Short-Term Capital Gains (STCG) |
Long-Term Capital Gains (LTCG) |
Other Tax Rules |
|
Gold Mutual Funds |
Held for less than or equal to 24 months → taxed as per income tax slab rate |
Held for more than 24 months → 12.5% flat (no indexation) |
No GST |
|
Gold ETFs |
Held for less than or equal to 12 months → taxed as per income tax slab rate |
Held for more than 12 months → 12.5% flat (no indexation) |
Demat and brokerage charges apply |
|
Physical Gold (jewellery, bars, coins) |
Held for less than or equal to 24 months → taxed as per income tax slab rate |
Held for more than 24 months → 12.5% flat (no indexation) |
GST applies on purchase, making charges not refundable |
|
Sovereign Gold Bonds (SGBs) held to maturity |
Not applicable |
Capital gains at maturity are tax-free |
Interest of 2.5% per annum taxed as per slab rate |
|
SGBs (sold before maturity) |
Held for less than or equal to 12 months → taxed as per slab rate |
Held for more than 12 months → 12.5% flat |
No indexation benefit |
|
Digital Gold |
Held for less than or equal to 24 months → taxed as per slab rate |
Held for more than 24 months → 12.5% flat (no indexation) |
Similar tax treatment as physical gold |