Skip to content 
Gold and India share a relationship that spans millennia. From wedding trousseaus to festival purchases, gold occupies a unique position in the Indian consciousness.
But while our cultural affinity for gold remains strong, the way we invest in it is undergoing a quiet revolution.
The Physical Gold Problem
India imports roughly 800 tonnes of gold annually, making it the world’s second-largest consumer. Yet most of this gold sits locked away in bank lockers, generating exactly zero returns while costing money to store safely.
Indian households own over 25,000 tonnes of gold. That’s wealth essentially frozen in time.
Physical gold comes with significant friction costs. Making charges on jewelry can range from 10% to 25% of the gold value. When you sell, buyers offer less than the pure gold value.
Storage is another concern. You either pay for a bank locker or worry about home security. And then there’s the question of purity.
The Digital Alternative
This is where gold investments through financial instruments become compelling. Instead of buying physical gold, you’re investing in products that track gold prices.
The advantages are clear: no storage concerns, no purity doubts, complete liquidity, and your investment moves precisely with gold prices without the friction costs.
For Indian investors, platforms like Vested have opened access to U.S.-listed gold products. The U.S. gold market offers distinct structural advantages.
First, the liquidity in U.S. markets significantly exceeds India’s. You can trade larger quantities without impacting prices.
Second, global gold prices are primarily discovered in international markets, and U.S. products track these prices with minimal error.
Third, you gain currency diversification. Exposure to both gold and the U.S. dollar.
Consider this scenario: if gold prices remain flat in dollar terms but the rupee depreciates 5% against the dollar, your dollar-denominated gold investment still delivers a 5% return in rupee terms.
Your Investment Options
Through platforms like Vested, Indian investors can access several types of gold products.
Gold ETFs are the most straightforward option. These funds hold physical gold in vaults and issue shares representing fractional ownership. When you buy a share, you own a tiny piece of actual gold bars sitting in a secure vault.
The share price moves in lockstep with gold prices. The beauty of ETFs lies in their simplicity and cost-effectiveness, with expense ratios typically under 0.5% annually.
Gold mining stocks and ETFs represent a fundamentally different proposition. You’re not buying gold. You’re buying companies that extract gold from the ground.
These can offer leveraged exposure to gold prices. When gold rises, mining company profits can rise faster because their costs remain relatively fixed. However, this works both ways.
The 3x Performance Advantage
Here’s what surprises many investors: gold mining ETFs have historically outperformed both U.S. gold ETFs and India-based gold ETFs by significant margins. Often by 2x to 3x during gold bull markets.
Gold miner ETFs operate on operational leverage. Here’s the mechanism: when gold prices rise by 10%, a mining company’s revenue increases by 10%.
But because their extraction costs (labor, energy, equipment) remain largely fixed, their profit margins can expand by 20%, 30%, or even more. This means mining stocks can amplify gold’s price movements significantly.
| Investment Type | Performance Pattern | Volatility | Key Feature |
| India Gold ETFs | Tracks domestic gold prices | Low | SEBI-regulated, higher fees |
| U.S. Gold ETFs | Tracks global gold prices | Low | Lower costs, dollar exposure |
| Gold Miner ETFs | 2-3x gold price movements | High | Leveraged returns, dividends |
Mining companies can also increase production, acquire new deposits, and improve extraction efficiency. A well-managed mining company isn’t just riding gold prices. It’s actively creating value.
Plus, mining stocks often pay dividends, adding another return component that physical gold can never provide.
However, this superior performance comes with trade-offs. Gold miner ETFs carry higher volatility, company-specific risks, operational challenges, and geopolitical issues.
For investors with higher risk tolerance, allocating a portion of your gold exposure to mining ETFs can significantly enhance returns. A blended approach (60% pure gold ETFs and 40% mining ETFs) offers an attractive middle ground.
Tax Implications
Gold investments through Vested are treated as foreign assets from a tax perspective.
| Holding Period | Tax Treatment |
| Short-term (less than 24 months) | Gains added to income, taxed at your slab rate |
| Long-term (24 months or more) | 12.5% flat rate (no indexation) |
You must report these holdings in your income tax return under Schedule FA (foreign assets) and Schedule FSI (foreign source income).
If claiming foreign tax credits, you’ll need to file Form 67 before filing your ITR. If you hold foreign assets, you’re required to file an income tax return even if your income is below the basic exemption limit.
Portfolio Allocation
Financial planners typically recommend keeping 5% to 15% of your portfolio in gold.
The logic isn’t that gold delivers spectacular returns. Over long periods, equities have significantly outperformed gold. Rather, gold’s value lies in its non-correlation with other assets and its role as a crisis hedge.
When stock markets crash, when currencies wobble, when inflation surges unexpectedly, gold often holds its value or even appreciates. It’s portfolio insurance, not a growth engine.
Getting Started with Vested
The process is straightforward. After completing your KYC (which includes PAN verification and address proof), you transfer funds to your Vested account.
You can access gold ETFs through Vested’s curated collection of gold investment products. This collection includes various options spanning different approaches to gold exposure.
Ready to explore? Visit Vested’s collection of gold ETFs and gold miner ETFs to find options that align with your investment strategy. Whether you’re looking for the stability of pure gold exposure or the growth potential of mining stocks, the collection gives you direct access to U.S.-listed gold products.
