InvestorQ : What do we mean by investing in commodities like gold? Like do we get a share of the total gold value in market?
Sarthak Rawat made post

What do we mean by investing in commodities like gold? Like do we get a share of the total gold value in market?

Answer
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Arya Nanda answered.
1 year ago


In the old days, the only way you could hold gold was by buying physical gold and holding it in the form of gold coins or as jewellery. It is estimated that Indian households hold close to 22,000 tonnes of gold with a market value of close to $1 trillion. Today there are various ways to hold gold each with different implications. Gold can be held physically as gold coins, nuggets or as jewellery. The risk here is managing the physical gold and taking care of storage and insurance. There is also the cost of form change of gold each time.

Another way to invest in gold is by purchasing Sovereign Gold Bonds. These bonds are based on grams of gold and linked to the market price of gold. They also pay 2.5% interest on the gold bonds. These bonds are assured by the government (gilt-edged) and they can be held as gold bond certificates or in your demat account.

You can also hold gold through gold ETFs issued by SEBI recognized mutual funds. In these, you get Gold ETF units, which have to be mandatorily held in your demat account. The ETF Gold units are traded in the stock exchange like any other share and move with gold prices. ETFs are backed for full value by actual physical gold which the mutual fund places with a gold custodian bank.

You can also hold gold futures on the MCX but this is just a contract that helps you participate in price movements. There is no ownership.

E-gold has come back wherein you can buy gold issued jointly by MMTC and PAMP of Switzerland. E-gold is held electronically and is backed by gold in the vaults of MMTC. E-gold has the lowest transaction cost and can also be bought through Paytm or PhonePe.You have a wide variety of ways to own gold and the choice is yours.