Gold is one of the top precious metals on Earth. A precious metal is defined as one which is scarce in availability hence is more valuable. India is the second-largest consumer of the commodity. It is often used for the purpose of gifting and is considered as a good omen for an exchange on special occasions.
Due to the nature of usage, gold is often idle. Stored in lockers in banks or at home, gold in any form is not being utilized to its full capacity. Gold should not be an idle resource, as it is valuable. It is an investment that should reap an appreciation of capital. Here are some ways to earn attractive returns from the idle gold kept in your locker-
1. Gold Monetization Scheme
In 2015, the Government of India launched the GMS (Gold Monetization Scheme) to aid investors earn returns on gold, while also grant liquidity to banks. A bank’s customer could deposit idle gold held and earn interest rates ranging from 2.25% to 2.50%. Period of deposit varied as per customer preferences – medium term (5 to 7 years) or long term (12 to 15 years).
In June 2018, the Reserve Bank of India amended the scheme to include short term (1 to 3 years) deposits as well. These were declared to be a bank’s on balance sheet liability by RBI. Deposits were also permitted for broken periods such as 1 year 5 months, 2 years 3 months etc. The interest rates payable were adjusted as per the period involved.
2. Gold Certificates
Commercial banks also have the facility of Gold Certificates, wherein holders of idle gold bars, coins, jewellery etc can deposit the same and receive an interest bearing certificate from the bank in exchange. This certificate is transferable and declares ownership of the deposited gold. After the lock in period, depositors can withdraw the gold. Investors can also utilize the certificate as collateral for availing loans. Income from interest is exempt from taxes as well.
3. Commodities Trading:
Another method of earning from gold is through trading in the commodities markets. This is however a riskier method of investment, much like trading in the share market. Trading gains rely on market price movements, and timing of entry and exit. Significant knowledge of the commodities market dynamics is vital in order to benefit from trading gains.
4. Gold ETFs
ETFs are exchange-traded funds that aid investors to invest in gold on the exchange. ETFs are a great way to reduce the inconvenience of storing excess gold in terms of risk of theft, ensuring purity and risk of not finding a buyer for resale. Gold ETFs aid the investment in gold over the exchange just like trading in shares of a company. Buying and selling aids to generate revenue from price movements of gold.
5. Sovereign Gold Bonds
Gold bonds are issued by the RBI. They are essentially government securities of value 2 grams to 500 grams value of gold. Bonds earn interest of 2.75% and can either be held to maturity or traded in the exchanges. Idle gold can be exchanged for purchasing income bearing gold bonds.
6. Gold Funds
Certain mutual funds invest directly in gold in both domestic and international markets. Idle gold can be avoided and instead be invested in these funds. Due to the expertise and domain knowledge of gold investing ensures growth in returns and an assured capital appreciation.
7. Gold SIPs
Mutual funds and banks also aid investors by way of an option of investing in small investments via SIPs (systematic investment plans). Through a gold SIP, the invested amount is invested regularly in gold ETFs. SIP investments are basically fund of funds.
8. Gold coins and gold bars
Idle gold in the locker can be traded for holding gold bars and coins of various denominations; equivalent to the value held. Gold coins are useful for gifting purposes, and gold bars are readily convertible to cash. As they are certified for quality upon conversion, an investor is not faced with the hassles of determining the purity of the gold held, or under any risk of fraud from the next buyer of gold.
It has become increasingly easier to invest in gold nowadays. It is no longer a rich man’s investment opportunity. With options such as ETFs and SIPs, any retail investor can enter the market for investing his gold. As it is a precious commodity, gold will almost never lose its sheen.
It is often compared to other precious metals such as silver, diamonds, and platinum. These are no doubt as valuable and rare and good for investment or consumption. However, India as a whole has a huge demand for gold, and the opportunities of investments are booming nowadays, even for small investors.