'It has always been viewed as a hedge against inflation.'
Indians bought 62 tonnes of gold bars coins in the January-March quarter of 2026, far more than the 20 tonnes of net demand for gold exchange-traded funds (ETFs) and close to the 66 tonnes of jewellery demand, according to the World Gold Council's Demand Trends: India Focus report. Many investors continue to favour physical gold, despite the availability of regulated financial products.
Gold bars and coins remain deeply embedded in India's saving culture. "Physical gold resonates because it allows people to touch and feel a tangible asset," says Gnanasekar Thiagarajan, director, Commtrendz Research.
Rituals and traditions also enhance the appeal of gold bars and coins. "Purchase of physical gold during festivals is regarded as auspicious," says Ajay Suresh Kedia, director, Kedia Advisory.
Physical gold also provides a sense of security, as is most apparent during periods of financial stress. Gold also serves as a store of value.
"It has always been viewed as a hedge against inflation," says Colin Shah, managing director, Kama Jewelry.
"Families also regard it as a medium for intergenerational wealth transfer," adds Prashasta Seth, CEO, Prudent Investment Managers.
Recent strong returns of gold have also led to high purchases of gold bars and coins.
Even when investing, many people prefer bars and coins over gold ETFs. "They give higher weight to emotional value over pure investment efficiency," says Kedia.
"Bars and coins offer direct ownership, without having to go through intermediaries," says Prasanna Pathak, deputy CEO, The Wealth Company. The purchase does not carry counterparty risk.
Bars and coins are more price-efficient than gold jewellery. "Jewellery has higher making charges, and there is a wider spread when sold in times of need," says Thiagarajan.
Physical gold, however, is not a zero-cost investment. "Premiums over the market price typically range from 2 to 10 per cent, depending on size and brand," says Kedia.
"Coins involve minting charges, which can range from 8 to 16 per cent," says Thiagarajan. Buyers also have to pay 3 per cent GST. Branded or tamper-proof products carry packaging charges. Storage adds to cost: A locker can cost around Rs 2,000 to Rs 15,000 a year. "This asset type also comes with insurance costs," says Shah.
When buyers sell bars and coins, they lose the making charges and face a buyback spread. "The seller offers a price below the prevailing market rate," says Kedia.
Gold ETFs suit investors who want a pure investment vehicle. Their pricing is transparent. "Investors get real-time pricing on the exchanges," says Seth. Being listed, they offer liquidity. Investors can buy or sell them throughout the day.
Gold ETFs are also low-cost products: The expense ratio of gold ETFs and fund of funds ranges from 0.05 to 0.80 per cent.
Gold ETFs fit easily into a diversified portfolio. Rebalancing through them is easy. "However, they are exposed to market risks and don't offer the touch and feel Indian investors associate with gold," says Shah.
What should you buy?
First, define the purpose of the purchase.
"Investors buying gold for cultural reasons or gifting, or those who prioritise tangible ownership, should go for physical gold," says Seth. Investors, he adds, seeking disciplined portfolio allocation and wealth creation may be better served by gold ETFs.
A combination may also work. "Physical gold can meet cultural and behavioural needs, while ETFs can serve the investment allocation role," says Pathak.
Buyers must observe a few precautions. "Purchase only BIS-hallmarked products from banks and government-backed outlets," says Pathak. Banks offer certified coins and bars. MMTC-PAMP may also be considered. Shah adds that well-known jewellers can provide transparency, consistency, and confidence regarding buyback.
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Feature Presentation: Aslam Hunani/Rediff