Published: Aug 4, 2023, 10:15am
Gold is among the most favorite commodities Indians like to invest in because of two main reasons—the country’s love for the yellow metal and the hedge that it can potentially provide against inflation. Besides retail investors, majority interest for gold arises from central governments worldwide and exchange traded funds (ETFs) houses as well.
There are multiple ways to invest in gold. Here’s a detailed guide on how you can determine the price of gold and make the best of your gold investment.
Featured Partner
1
Hard Assets Alliance
Powerful Online Marketplace
Fund, buy and manage your holdings on a refreshingly simple platform
Secure
Assets are stored in highly secure non-bank vaults
Liquidity
Take delivery from the start, or any time later, around the world
On Hard Assets Alliance’s Website
Here’s a detailed guide on how you can determine the price of gold and make the best of your gold investment.
The price of gold (XAU) today, as of 9:34am, is INR 5,148 per gram of 24-carat gold. That's down 0.08% on yesterday's close of INR 5,152.
Compared to last week, Gold is down 0.97%. It's up 1.65% on one month ago.
The 52-week gold price high is INR 5,216, while the 52-week gold price low is INR 5,035.
The price per gram of 22-carat gold is INR 4,719.
Gold prices vary by city. Check out below to see the price of gold where you live.
*The gold price data above is provided by Zyla Labs, which sources asset price data from a wide range of sources. This gold price represents an average of spot gold prices on several leading metals exchanges. Prices are updated every business day.
The price of gold (XAU) today, as of 9:34am, is INR 5,148 per gram of 24-carat gold. It's down 0.08% on yesterday's close of INR 5,152, down 0.97% on last week and up 1.65% on one month ago.
The 52-week gold price high is INR 5,216, while the 52-week gold price low is INR 5,035.
The price per gram of 22-carat gold is INR 4,719.
If you purchased a gram of 24-carat gold at today’s price of INR 5,148 and sold it in 10 years at an average annualized return of 10%, you’d earn approximately INR 8,844 in interest, assuming daily compounding.
If you want to start investing in gold digitally, there are a few ways to do so. Digital gold is a method by which you can invest in the yellow metal in small fractions anytime and anywhere with the convenience of digital access to the commodity. Keep in mind you may owe taxes on any gains you realize.
The 24-carat gold price decreased by 0.08% from yesterday’s closing price. Overall, the price of gold has moved up this year. But over the past 90 days, it has fallen to its current price. Gold’s price today is in line with its average for the first half of the year of INR 5,148 per gram of 24-carat gold.
Featured Partner
1
Hard Assets Alliance
Powerful Online Marketplace
Fund, buy and manage your holdings on a refreshingly simple platform
Secure
Assets are stored in highly secure non-bank vaults
Liquidity
Take delivery from the start, or any time later, around the world
On Hard Assets Alliance's Website
Typically, the demand and supply for an asset class determines its price. This phenomenon is no different for gold. However, the price of gold is heavily dependent on other key factors including:
Gold is considered an important reserve for any central bank worldwide given its ability to support the national currency. For instance, all banknotes issued by the Reserve Bank of India (RBI) are backed by gold.
When a country exports gold and continues to have rich gold reserves, such a situation automatically helps in strengthening its currency. Countries with low gold reserves or seen importing more gold may witness their currency getting devalued with the passage of time.
This explains why the Indian government recently hiked import duty on gold from 10.75% to 15% to stifle an increase in gold imports, which was putting pressure on the country’s current account deficit. By making gold purchases expensive, gold imports could be brought down consequently preserving foreign reserves.
In general, when a central bank or government buys more gold, its prices tend to increase. Exports may result in lower gold prices in the home country.
The price of gold is inversely proportional to the value of the U.S. dollar. When the U.S. dollar strengthens, the price of gold falls and vice versa. Amid high inflation, the capacity to purchase more goods decreases, thereby denting the value of the U.S. dollar. As the U.S. dollar depreciates, the price of gold picks up.
In India, to determine the price of gold, the U.S. dollar’s conversion to the Indian rupee is considered. When the Indian rupee depreciates against the U.S. dollar, the price of gold is likely to fall.
When the demand for gold rises, it pushes its prices higher. The demand for gold can increase via two ways:
Household demand for gold is fuelled by the demand for gold jewelry or other physical forms of gold purchases such as bars and coins. India is among the top physical gold buying countries. When the demand dips, supply increases, weakening the price of gold.
Investment demand is mostly fuelled by ETFs houses worldwide who purchase gold to cater to their investing clients’ requirements. Q1 2022 Gold Demand Trends report by Gold.org shows gold ETFs had their strongest quarterly inflows since Q3 2020, fuelled by safe-haven demand. Holdings jumped by 269 trillion, more than reversing the 174 trillion annual net outflow from 2021.
Gold is a commodity that is available in limited quantities and miners have to ensure the demand is being constantly met. The same report by Gold.org mentioned above also showed mine production hitting an all-time first-quarter high, which dates back to 2000, to 4% and a 15% year-on-year high to 310 tonnes jump in resurgent recycling marking the strongest first quarter for gold recycling activity for six years.
As a general demand-supply rule, when the supply of gold increases, its price is likely to fall if the demand remains unchanged.
Gold prices are fixed twice a day by five London Bullion Market Association (LMBA) market makers who comprise the London Gold Market Fixing Limited. They set the prices for gold that are globally considered as the international standard for gold pricing. Bids are collected from buyers and sellers and a price is discovered as fixed price for the day.
Two kinds of gold prices are discovered via the LMBA market makers:
In India, gold prices are determined by the Indian Bullion Jewellers Association (IBJA). IBJA invites “bid” and “ask” quotes from the top ten gold dealers in India who arrive at a price suggestion by factoring in the international price of gold and multiplying it with the currency exchange value, import duty and other taxes and their margins.
IBJA then determines a mean price for gold on a particular day. This mean price is further corrected by adding any other taxes needed to derive a gold rate for the day.
In India, gold is traded on a government-run dedicated stock market exchange called the Multi Commodity Exchange (MCX). A gold trade on the MCX implies trading in future contracts of gold, also called gold futures.
Featured Partner
1
Hard Assets Alliance
Powerful Online Marketplace
Fund, buy and manage your holdings on a refreshingly simple platform
Secure
Assets are stored in highly secure non-bank vaults
Liquidity
Take delivery from the start, or any time later, around the world
On Hard Assets Alliance's Website
The way a futures contract works is that an agreement is made to buy or sell gold at a future date for a set price. While the investor has the option of taking the physical possession of gold at the determined future date, it is more common for them to settle the futures contracts in cash.
The MCX permits the investor to trade in gold via four kinds of futures contracts. These include:
To trade in a gold futures contract, you need to have a trading account with a commodity account with the commodity exchange of your choice. Besides the MCX, global commodity exchanges are popular for gold futures trading. Top commodity exchanges for gold trade include:
The price of gold traded on the MCX is determined by the following factors:
1 troy ounce is equal to 31.103 grams.
The quoted price of gold on the MCX is 10 gms for 1 unit of gold. Hence to determine the price of gold on the MCX, the calculation formula is:
Price of 1 Unit = International gold price x USD-INR conversion / troy ounce to grams conversion
Investment in gold can be via multiple ways depending on which market instrument the investor is most interested in. Among popular ways to invest in gold are:
To make a physical gold purchase, investors can choose between:
The best way to buy and sell gold jewelry is via jewelers. Choosing hallmarked jewelry is a sure shot way to ensure you aren’t paying more than the value of the purchase.
Any purchase of gold jewelry attracts cost of making and taxes, namely the Goods and Services Tax or the GST. Making charges to the tune of 5% to 20% and GST of 3% are standard.
When you sell this gold jewelry, you may not be able to retrieve the making charges and the GST paid at the time of purchase. You may need to pay capital gains tax over the proceeds you make from selling your jewelry—short-term capital gains tax for jewelry below the period of 36 months and long-term capital gains tax of flat 20% if held above 36 months.
The best way to buy and sell gold coins and bars is via jewelers, bullion traders or government-backed institutions such as the MMTC. You must check the hallmark on the gold coins and bars before buying.
Gold coins and bars attract making charges to the tune of 2% to 10%, and a GST of 3% similar to what one pays for the purchase of gold jewelry. This GST value is not retrievable at the time of sale.
Sovereign gold bonds are government-backed securities available in denominations of grams. The minimum investment in a sovereign gold bond can be 1 gram and the maximum investment limit can go up to 4 kilograms per year for an individual and 20 kilograms for trusts.
SGBs are issued for a lock-in period of eight years and their early redemption is permitted after the first five years of investment. Investors can’t redeem SGBs on any given day; instead, they can redeem their SGBs on interest payment dates announced by the RBI.
Sovereign gold bonds are considered better investments than physical gold as purchase of these bonds attracts lower costs and better annual returns. Investors are paid an assured interest rate of 2.5% semi-annually. Upon redemption of SGBs, interest paid to the investor is taxable while the capital gains upon maturity of these are tax-exempt for individual investors. This tax exemption is not applicable for trusts, however. Click the following link to read our guide on how to buy sovereign gold bond.
Gold ETFs are units of gold held in a dematerialized form, and are available to trade in similar to how mutual fund units are available on the stock market exchanges.
Investing in gold ETFs is simple: you need to choose your preferred gold ETF listed by your brokerage company or fund house on the stock exchanges and begin trading via your demat account.
Gold ETFs do not have lock-ins and are fairly easy to enter and exit. Whenever a gold ETF trade is conducted, a brokerage charge is applicable. The fund house also charges processing fees.
The taxation on gold ETFs is similar to the taxation of any market-linked asset linked on the stock exchanges. Investors pay capital gains tax on making a profit and do not need to pay any GST like in the case of physical gold.
With digital gold wallets, users can download the mobile applications of the gold wallet provider and invest as low as INR 1 in the gold wallet through various online fund transfer facilities. This is similar to buying INR 1 gold.
These companies store this gold in the lockers of MMTC-PAMP.
The purity of gold is predefined and the gold can be sold and bought any time and from anywhere through these mobile applications.
In the recent past, many companies have introduced gold wallets. These companies include the likes of PhonePe, GPay, Paytm, among others, who provide their users this facility.
Import duty is the tax the government imposes on the import of goods into the country. This import duty has to be borne by the consumer who has imported the goods in question, and the purpose of levying import duty is to check the movement of goods and also protect domestic industries besides earning state revenue.
Import duty falls under the category of indirect taxes in India and is commonly referred to as customs duty as well. For the import of gold, the Indian government has set a limit of 1 kg of physical gold and any import above 1 kg is taxed heavily.
Here’s how the gold import duty in India looks like:
Investing in gold must be done under supervision and with the help of financial experts or portfolio managers. While gold investing has its sheen, creating an all-gold portfolio isn’t considered the wisest choice. As a thumb rule, gold should be used to add a more stable asset class to your financial portfolio, and help you in diversifying your investments to some extent.
Karat is a measure used to determine the purity of gold.
24 karat gold means the gold is 99% pure whereas 22 karat gold means the gold is 91.67% pure and remaining 8.33% metal is an alloy mixture that could comprise of copper, silver or nickel added to improve the gold’s durability.
The availability of gold in different cities varies and in most cases, gold needs to be transported to different cities for sale. This transport cost is passed on to the consumer resulting in different rates across the country.
Other factors may include instances when previously-purchased gold at lower value being sold in a city is on offer at a lower rate compared to the same amount being sold in another city. The jewelry associations of different cities may also end up influencing the final rate at which gold is being sold on a particular day.
Investment in digital gold can be profitable depending on when you sell your gold. The benefit of investing in digital gold is the ease with which the investment can be made via a digital platform. One doesn’t need to track gold prices with jewelers or bullion trades. The app or web platform that one uses to invest in digital gold can serve as a one-stop destination for all gold prices and research on when one should sell their holding.
Traditional form of investing in gold may not help you reap the benefits of passive income and often attract additional costs such as making charges, high storage charges to ensure safety and higher chances of fraudulent bets.
Investing in gold in the digital format could help you do away with costs that may eat into your returns. These costs include locker charges, GST on making charges and purchase/sale among others. Some common ways of investing in digital gold include buying SGBs, investing in gold via ETFs and trading on future prices of gold.
Tola is a metric used to weigh gold.
1 gram of gold is equal to 0.085735324183008 tola. In other words, 1 tola is equal to 11.663 8038 grams or 3/8 troy ounce.
In India, gold prices are determined by the Indian Bullion Jewellers Association (IBJA). IBJA invites “bid” and “ask” quotes from the top ten gold dealers in India who arrive at a price suggestion by factoring in the international price of gold and multiplying it with the currency exchange value, import duty and other taxes and their margins.
IBJA then determines a mean price for gold on a particular day. This mean price is further corrected by adding any other taxes needed to derive a gold rate for the day.
The current import duty on gold stands at 12.5%.
Amid high inflation, gold prices do not show signs of dramatic volatility. This is because when inflation is high, prices of stock market instruments such as securities and bonds witness unpredictable swings and can become risky to invest in.
Gold being considered a reliable commodity, the price of which is expected to appreciate with time and give positive returns, becomes a safe haven for risk-averse investors who fear market volatility may dry up their gains significantly. This ensures the price of gold does not fall as steeply as the price of other market instruments and remains fairly stable or even rises. This is not a hard and fast rule but is often the case.
When high inflation is clubbed with a high interest rates scenario, gold may not end up being considered the safest commodity to invest in. This is because when interest rates are hiked, investors begin participating in currency-led assets (which hold promise for positive returns) as opposed to investing in gold.
GST refers to the Goods and Services Tax, which is levied by the Indian government on the purchase and sale of goods and services. In India, GST is levied on certain gold and gold-related services as well.
Physical gold
The current GST rate for buying and selling physical gold stands at 3%. When jewelers purchase gold jewelry, coins and bars, they need to pay GST. This tax liability is often passed on to the end consumer and as a result, you pay 3% GST on the gold jewelry you purchase.
One should be aware that making charges on gold also attracts GST, which is separate from the overall 3% GST charged. The GST on making charges of gold jewelry or related gold products currently stands at 5%. If you are a registered gold jeweler, you can avail a 2% input tax credit on the making charges.
Sovereign gold bonds
SGBs do not attract GST as they are treated like securities and the taxation for SGBs hence, is similar to taxation on securities.
However, GST is applicable on the securities transaction tax (STT) and the brokerage amount one pays on the purchase and sale of SGBs.
Gold ETFs
Gold ETFs attract GST on the STT, the brokerage and the fund expense ratio, which 18%.
Aashika is the India Editor for Forbes Advisor. Her 15-year business and finance journalism stint has led her to report, write, edit and lead teams covering public investing, private investing and personal investing both in India and overseas. She has previously worked at CNBC-TV18, Thomson Reuters, The Economic Times and Entrepreneur.