How to Do Gold Trading Online in India

The November 2016 demonetization move by the Government of India brought the world gold market to a grinding halt. However, the various political initiatives underway and in the pipeline are expected to strengthen the Indian economy and increase transparency in the gold industry, which in turn is projected to give a solid boost to gold demand, says a report by the World Gold Council.

Why Trade Gold Online?

The two most important reasons for gold trading online in India are:

  • This precious metal is a good hedge against inflation: The ROI on gold maps to the inflation rate.
  • Gold is a great way to diversify a highly-volatile portfolio: Gold prices have a negative correlation with the stock market.

Ways to Gold Trading Online in India

E-Gold:

Also known as paper gold, this can be traded on the National Spot Exchange. These are most popular amount active traders who purchase smaller quantities and sell immediately when gold prices rise.

Gold ETFs:

These are Gold Exchange Traded Funds and are similar to mutual funds. They are funds that invests in gold, while the units of the fund are listed on the stock exchange. One can invest in Gold ETFs on the stock exchange by opening demat and trading accounts. The minimum quantity one can trade is 1 gram. The buying and selling of Gold ETFs would involve brokerage fee and fund management charges. Despite these charges, online trading in Gold ETFs is considered as the most cost effective way of investing in this precious metal.

Gold Fund of Funds:

A Gold FOF invests in Gold ETFs on your behalf. Therefore, you do not need to open a demat account, but would need to pay fund management charges for the Gold FOF scheme as well as the underlying Gold ETF. A SIP, or Systematic Investment Plan, is possible in this case, wherein the SIP allows you to invest a predetermined amount into gold at regular intervals, which may be weekly, monthly or quarterly. This is perfect for those who wish to invest relatively smaller amounts.

Equity-Based Gold Funds:

These are also like mutual funds, but instead of investing in directly in the precious metal, these invest in companies that are in the gold industry, like gold mining. Being equity-based, these gold funds come with a higher degree of risk, while offering opportunities for higher returns.

Sovereign Gold Bond Scheme:

This was launched by the government to discourage the purchase of gold jewelry and bars and divert the funds into investments that would contribute to the economy. Available in denominations of 5, 10, 50 and 100 grams of gold, these bonds offer interest on the investment you make. So, one benefits from the interest as well as the appreciation in value (with increase in gold prices. These bonds can be purchased from any bank, NBFC (non-banking financial companies), post office or an NSC (National Saving Certificate) agent.

The two most popular ways of gold trading offline in India are buying gold jewelry and purchasing gold bars and coins.

So, there you go. All the best!

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About the author

Mani Karthik

As an NRI (Non-Resident Indian), I've lived in the USA, India & Middle East for over a decade, in over 6 cities like Mountain View, Dubai, San Jose, Fort Lauderdale, Kochi, and Chennai. I've worked for small and big companies and recently started my own startup. On this blog, I share everything I've learned in life, living abroad as an NRI with my roots in India. Everything from personal finance to immigration. I'm on a mission to help all NRIs return to India. WhatsApp me at +001-408-489-4785 if you have questions.

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Having lived in the USA, India and UAE, I share everything that I’ve learned in life. My aim is to help people by sharing whatever I know, through this blog. Come join my pursuit in becoming a smarter, richer & happier person! About Me!