Gold hit a new high as worries about an escalating trade dispute weighed on investors' minds. President Donald Trump's decision to impose tariffs on all automotive imports fueled the uncertainty. Bullion climbed 0.7% on Friday, reaching a record-breaking price of over $3,077 per ounce, surpassing the previous high set just a day before. In India, the price of 24-carat gold increased to Rs 90,980 per 10 grams, representing a gain of Rs 1,140 per 10 grams.
India has seen a surge in gold prices driven by significant central bank purchases and declining interest rates. The Reserve Bank of India (RBI) increased its gold reserves by 32.63 tonnes in the first half of FY25, bringing the total to 854.73 tonnes. Analysts are bullish on the outlook for gold in the next financial year.
But what's the best way to invest in gold now.
According to investment analyst and CA Nitin Kaushik, gold serves as more than just an investment opportunity. It also represents tradition, security, and a hedge against uncertainty. Kaushik emphasized the importance of gold as a valuable investment instrument and recommended the most effective approach to acquiring the precious metal.
"Gold isn’t just an investment; it’s tradition, security, and a hedge against uncertainty. But recent tax changes have shaken things up. If you’re planning to invest, what you must know these," Kaushik noted.
> Physical Gold – New Tax Rules!
🔸 Sell within 2 years, and your gains are taxed at your income slab rate.
🔸 Hold for over 2 years, and you pay 12.5% tax—no more indexation benefits.
> Gold Mutual Funds – Same Rules Apply
🔹 Sell before 2 years, and profits are taxed at your slab rate.
🔹 After 2 years, 12.5% tax applies (Investments before April 1, 2023, still enjoy indexation).
💡 Takeaway: If you invested before April 2023, you got lucky. If not, rethink your strategy.
> Gold ETFs – A New Edge!
✔ Sell within 1 year, and gains are taxed at your slab rate (earlier, this period was 3 years).
✔ Hold beyond a year, and pay 12.5% tax.
💡 Takeaway: ETFs are now more attractive for medium-term investors.
> Sovereign Gold Bonds (SGBs) – The Best Bet?
🏦 Sell within 12 months, and gains are added to your taxable income.
🏦 Hold for over a year, and pay 12.5% tax (No indexation).
🏦 But if you redeem with RBI or hold till maturity, gains are completely tax-free.
💡 Takeaway: SGBs remain the best option for long-term gold investors.
Best way to invest in Gold?
With regards to investing options, Kaushik suggests that Sovereign Gold Bonds (SGBs) are ideal for long-term investors seeking tax-free maturity gains. In contrast, ETFs have become more tax-efficient for medium-term investments. However, physical gold may be less attractive due to factors such as storage costs, making charges, and tax inefficiency. It is important to evaluate your gold investment choices wisely in light of this information.
"SGBs – Ideal for long-term investors (tax-free maturity gains). ETFs – Now more tax-efficient for medium-term investments. Physical Gold – Less attractive due to storage costs, making charges, and tax inefficiency. Gold is shining, but are you investing wisely," Kaushik noted.
SGB investment
SGBs were seen as an appealing investment choice, offering investors the opportunity to own gold in a dematerialized form without the need for storage concerns, while also receiving an annual coupon ranging from 2.5 to 2.75 percent.
The RBI has introduced a total of 67 SGB tranches, issuing 14.7 crore units. These bonds are listed and traded in the cash segment of the BSE and NSE, making them easily accessible for retail investors who can buy and sell them through their demat accounts.
While SGBs have a maturity period of eight years, they come with a lock-in period of five years. As a result, investors have the option to redeem them upon maturity.
Early redemption
In April 2025, investors in Sovereign Gold Bonds (SGB) from Series III, IV, and V issued during 2017-18 have the opportunity to opt for early redemption. The redemption dates are scheduled for April 16, April 23, and April 30. Investors who acquired gold bonds in 2017-18 at prices ranging from Rs 2,990 per gram are now positioned to achieve a significant gain of almost 200% per gram.
In 2015, the Indian government introduced the Sovereign Gold Bonds (SGBs) scheme with the aim of promoting an alternative form of gold investment and decreasing the nation's reliance on imported gold.
SGBs have a tenure of eight years, with the option for investors to redeem their bonds early after five years from the date of issue. However, most investors choose to hold onto their bonds until maturity to take advantage of the capital gains tax exemption. The government introduced the SGB scheme in 2015 to promote investment in digital gold over physical gold.
Despite a successful launch that encouraged individuals to opt for SGBs over traditional gold purchases, the desired outcome of reducing overall gold imports was not achieved. Nearly ten years later, India continues to be a prominent importer of gold on a global scale, with imports totaling $49 billion in the fiscal year 2023-24, representing a 30% increase year-on-year.
Despite this initiative, India continues to import 700-800 tonnes of gold annually, even as prices rise and investments in gold bonds and Gold ETFs increase.
The final batch of SGBs was released in February 2024 at an issue price of Rs 6,263 per gram. The scheme was subsequently halted due to the government facing higher liabilities as bond payouts exceeded the income generated.