Investing in gold bullion offers Indians a tangible asset with intrinsic value. Gold bullion investment can be approached through physical ownership or digital options.
- Direct purchase: Buying gold bullion bars or coins from authorised dealers ensures purity and certification.
- Gold Exchange-Traded Funds (ETFs): Digital investments in gold ETFs allow flexibility and eliminate storage needs.
- Sovereign Gold Bonds (SGBs): Issued by the Indian government, these bonds offer interest along with gold returns.
- Digital gold: Available through mobile apps, digital gold lets investors buy gold in small amounts and store it virtually.
- Jewellers’ investment plans: Select jewellers offer plans for small-scale, periodic investments in gold bullion.
Why is it illegal to own gold bullion?
In most countries, owning gold bullion is legal and considered a way to preserve wealth. However, in some places, owning gold bullion without proper permits or documentation can be illegal due to government regulations designed to control gold trading and prevent illicit activities like money laundering and tax evasion. Restrictions may also be in place during times of economic crisis or to manage currency stability. It is essential to understand your local laws before purchasing or holding gold bullion to ensure you comply with all legal requirements and avoid penalties.
Main types of gold bullion
Gold bullion is available in various forms, each serving different purposes and investment needs. Below are the main types:
- Gold bars: Known for their high purity, gold bars come in various weights, providing large-scale investment options.
- Gold coins: Easily tradable and widely available, gold coins offer flexibility for investors.
- Gold rounds: Similar to coins but without a face value, gold rounds appeal to collectors and investors.
- Gold ingots: These are rectangular bars, often heavier and cost-effective for bulk investments.
- Gold biscuits: Smaller than bars, gold biscuits are ideal for personal investment and gifting purposes.
Benefits of owning gold bullion
Owning gold bullion comes with several financial advantages that make it a preferred choice for long-term investors. Firstly, gold bullion is a tangible asset that holds intrinsic value, offering stability even when markets are volatile. It acts as a hedge against inflation, preserving purchasing power during times of economic downturn or currency depreciation.
Secondly, gold bullion is highly liquid. Whether in the form of bars or coins, it can be easily sold or traded across global markets, ensuring quick access to funds when needed. It also carries no credit risk, as its value is not dependent on any institution or counterparty.
Additionally, gold bullion is recognised worldwide, making it a universally trusted investment. For those planning wealth preservation or diversification, it offers a low correlation with other assets like stocks and bonds. Over time, owning physical gold bullion helps maintain financial security while offering the peace of mind that comes with a reliable store of value.
Quality and purity of gold bullion
Gold purity is essential when investing in gold bullion. Below are quality and purity indicators for gold bullion:
- Karat rating: The standard measure of purity, with 24-karat representing pure gold.
- Fineness: Represented as a decimal, such as 0.999, indicating 99.9% pure gold.
- Hallmark certification: Assures the bullion meets regulatory standards of purity and authenticity.
- Refinery stamp: Indicates that reputable refineries certified the gold.
- Weight and shape consistency: Ensures no added impurities, preserving its value for investment and resale.
Difference between gold and gold bullion
| Aspect |
Gold |
Gold Bullion |
| Definition |
Gold in various forms, including jewellery. |
Gold in its purest form, such as bars and coins. |
| Purity |
Variable, depending on its form. |
High purity, often 24-karat or above. |
| Purpose |
Jewellery, industrial use, and investment. |
Primarily for investment and wealth preservation. |
| Market Value |
Lower resale value due to impurities. |
Higher resale value due to purity and liquidity. |
| Certification |
Not always certified for purity. |
Certified for purity and authenticity. |
Understanding the loan-to-value ratio in gold loans
The Loan-to-Value (LTV) ratio determines the maximum loan amount a borrower can avail against gold bullion. In the context of gold loans, Bajaj Finance offers gold loans only against 18-22 karat gold jewellery. The LTV ratio is set as per the guidelines set by the RBI. You can get up to 75% of your gold’s value as loan at competitive interest rates. For example, if your gold jewellery is valued at Rs.1,00,000, an LTV ratio of 75% would mean you could secure a gold loan of up to Rs.75,000.
