Gold holds a unique place in Indian households—both as a cultural symbol and as a hedge against uncertainty. With Diwali and Dhanteras around the corner, many will look to buy gold for ritual or gifting.
But with gold prices at record highs— ₹1.2-1.3 lakh for 10 gm of 24K gold—wholesale premiums, making charges, and volatility are bigger risks now than in ordinary times.
So, instead of buying blindly, think like an investor. Here are five ways to approach gold in a strategic, diversified way this festival—combining tradition, convenience, and prudence.
1. The traditional route — bars, coins and jewellery
Advantages: The biggest advantage of owning gold as bars or coins is that you can “see and hold” the asset. Liquidity is high—you can sell to jewellers or bullion dealers—and jewellery has sentimental and ornamental value.
Disadvantages: That liquidity factor of physical gold comes at a high price. Jewellers can charge anything between 5% and 20% as “making charges”, which you actually lose when selling your jewellery — even bars and coins.
Then there’s the factor of safe and secure storage, which comes at a cost, as well as insurance against your stockpile. Additionally, there maybe risk of purity — always insist on hallmarked gold from a reputed jeweller.
Investment tips: If you are buying gold jewellery, insist on “lighter” designs as they involve lower “making charges”. Buy gold coins and bars only from certified and trusted dealers—look for BIS hallmark for 999 purity. Avoid paying more than 1-2% extra for gold coins and bars. And most importantly, time the market—at record high gold prices, the margin for error is small.
Sure, physical gold still makes sense—especially for ritual/gift value—but treat most of it as a small part of your overall gold exposure.
2. Sovereign Gold Bonds
The sovereign gold bonds are issued by Government of India, denominated in grams of gold. Returns are linked to the gold price, plus you get fixed interest (~2.5% per annum) over the bond’s tenure.
Advantages: The sovereign gold bonds particularly shine in a high gold-price scenario — like, right now. There are no making charges, no storage cost, and you earn interest in addition to appreciation in value. And since it’s backed by the gold, the risk is minimal.
On maturity, you get equivalent value in cash (based on the prevailing gold price)—liquidity is decent through secondary market. What’s more, there is no capital gains tax on the gold component, though the interest earned is taxed.
Disadvantages: See these more like caveats. The lock-in period is typically eight years, with an exit allowed from the fifth year onwards. The secondary trading may lead to premium or discount, relative to the intrinsic value of the gold. The interest is taxable as per the tax slab.
Investment tip: If you plan to hold gold for medium-to-long term, sovereign gold bonds are among the most elegant instruments during high spot gold price periods—you avoid many “friction costs” of physical gold.
3. Gold ETFs and Gold mutual funds
Gold mutual funds or Gold ETFs are “paper gold” instruments traded like the stocks. They hold physical gold or gold futures as an underlying and track its price. Gold mutual funds invest in Gold ETFs or related instruments
Advantages: Gold ETFs are highly liquid, since they are bought and sold intraday via your brokerage or demat account. There are no concerns on purity, security, storage or making charges. The transaction cost is lower, vis-a-vis physical gold, and you can invest in as small an amount you like.
Disadvantages: While there are no making charges or storage costs, there’s a fund management fee (expense ratio) that’s incurred. You do not earn interest as in the case of sovereign gold bonds — the returns are purely from gold price movement. Meaning, in a volatile market such as now, ETF units can be tricky.
Investment tips: You can liquidate your Gold ETFs at will to buy physical gold for Dhanteras and Diwali. That means heightened outflows. As long as you are okay with short-term swings, Gold ETFs offer excellent flexibility.
4. Digital Gold
Many fintech apps and jeweller-backed schemes now let you “buy gold” in very small denominations—as low as ₹100—and hold a “digital equivalent” backed by physical gold stored in vaults.
Advantages: The entry barrier to digital gold is low, with an added advantage of instant buying of fractional grams. You can redeem for physical gold coins or bars at some point, or convert to Gold ETF in some platforms. There are no handling or storage charges for digital gold.
Disadvantages: There’s so-called “platform counterparty risk”, so make sure that the digital-gold provider has insured and audited vaults.
The premiums spread over spot may be higher in small trades. Redemption terms (lock-in, freight, conversion charge) might reduce effective yield.
Investment tips: Use digital gold for “festive bucket”—small amounts you buy for ritual or gifting on Dhanteras, as well as topping up exposure without needing to visit a store.
5. Gold-Linked Instruments
While not popular among individual gold investors, gold-linked instruments—mining stocks, gold futures and multi-asset funds—are for those who are serious about their bullion journey.
- Gold futures/derivatives: You contract to buy/sell gold at a future date — high leverage, high risk.
- Gold mining/metal stocks: Instead of owning gold, you own shares of companies involved in gold mining or refining.
- Commodity funds: Some mutual funds allocate a portion to gold or silver instruments.
Such instruments are riskier than other gold-investment avenues mentioned earlier, but there is potential for higher returns, or loss, compared to pure gold exposure. You can ride gold’s upside with leverage (in futures) or with equity leverage (in mining stocks).
They give some mixed exposure (if you also invest in equity/funds) so your gold component doesn’t feel too “dead money” if gold stalls.
Gold Buying Guide For Dhanteras
- Don’t chase highs — Stagger purchases through SIPs or tranches
- Compare prices — Check live gold rates on MCX before buying
- Ensure purity — Look for 24K (999) or 22K (916) hallmark
- Avoid jewellery — It’s consumption, not investment
- Think long term — Gold ETFs and gold bars build wealth
Gold Investment Tips
1. Don’t time the peak perfectly. With prices already high, trying to enter after a dip is tempting, but dips may be shallow. Dollar-cost averaging (buying over several days) can cushion volatility.
2. Mind transaction costs. When premiums, making charges or brokerage fees eat 2–3 % or more, your upside is eroded. Use low-cost channels where possible.
3. Check credentials. For physical or digital gold, verify hallmarks, provider audits, vault insurance. For SGBs and ETFs, verify issuer and regulatory compliance.
4. Diversify across types. Don’t put all your money into jewellery. Mix physical + paper + bonds.
5. Tax and holding horizon awareness. Holding periods matter for capital gains. Sovereign gold bonds have favourable treatment if held to maturity. ETFs and mutual funds have their own regime.
6. Stay disciplined. If gold runs sharply ahead faster than expected, have a plan to partially harvest—take profits in the tactical allocation.
But isn’t buying gold at record-high prices riskier?
Yes, the risk is greater. The upside from here may be smaller, and corrections are more likely. Yet, gold remains a strategic hedge against inflation, currency weakness, and global shocks.
The value of gold in a portfolio is not in its short-term returns alone, but in how it cushions volatility, preserves wealth, and keeps part of your assets in a non-correlated instrument.
Allocate not more than 5-10% of your total investment portfolio to gold. Use gold bonds or mutual funds for most of that allocation, and physical only for traditional or ritualistic purposes.
Dhanteras is the time to buy gold but a smart investor would do well to treat bullion less as tradition and more as a financial anchor. Use a mix of physical and non-physical routes, keep your costs low, don’t over-commit, and always leave space for flexibility. That way, “festival gold” can be both meaningful and intelligent.