Investing in gold has always been a popular choice for wealth preservation. However, with the evolution of financial markets, investors now have various options, including Physical Gold, Gold ETFs, and more. So, which one is better? Let’s compare their 5, 10, and 15-year returns and analyze their pros and cons.
Gold Investment Options: A Quick Overview
| Investment Type | Description |
|---|---|
| Sovereign Gold Bonds (SGBs) | Issued by the Reserve Bank of India, these bonds offer a fixed interest of 2.5% p.a. and have a minimum investment of 1 gram. |
| Gold ETFs | Exchange-traded funds linked to the price of gold, offering liquidity and ease of trading. |
| Gold Funds | Mutual funds that invest in gold assets. They allow SIP investments and offer exposure to gold without owning physical gold. |
| Digital Gold | A form of electronic gold where investors own a share of gold stored in vaults. |
| Physical Gold | Tangible gold in the form of jewelry, coins, or bars. Offers direct ownership but comes with storage and security concerns. |
Returns Comparison: Physical Gold vs. Gold ETFs
Both Physical Gold and Gold ETFs have their advantages. Let’s look at their performance over different time periods:
Physical Gold Returns
| Time Period | Gold Price (Per 10 Grams) | CAGR (Compound Annual Growth Rate) |
|---|---|---|
| 5 Years | ₹31,500 (Dec 24, 2019) to ₹78,500 (Dec 24, 2024) | 20% |
| 10 Years | ₹25,570 (Dec 24, 2014) to ₹78,500 (Dec 24, 2024) | 12% |
| 15 Years | ₹16,500 (Dec 24, 2009) to ₹78,500 (Dec 24, 2024) | 11% |
Analysis:
- Over the last 5 years, Physical Gold has delivered a CAGR of 20%, outperforming other gold investments.
- Over 10 and 15 years, gold has provided consistent returns, with a 12% CAGR in 10 years and 11% CAGR in 15 years.
Gold ETFs Returns
| ETF Name | 5-Year Returns | 10-Year Returns | 15-Year Returns |
|---|---|---|---|
| LIC MF Gold ETF | 14.07% | 10.28% | 9.62% |
| SBI Gold ETF | 13.8% | 10.02% | 9.54% |
| Axis Gold Fund | 13.95% | 9.8% | N/A |
| Invesco India Gold ETF | 14% | 10.14% | N/A |
Analysis:
- 5-year returns: Gold ETFs, like LIC MF Gold ETF and SBI Gold ETF, have provided returns ranging between 13.8% and 14.07%.
- 10-year returns: Over the last decade, Gold ETFs have given a 10% CAGR, slightly behind Physical Gold’s performance.
- 15-year returns: With the oldest funds showing a return range of 9.54% to 9.62%, Gold ETFs have consistently provided solid returns, but still lagging behind Physical Gold.
Key Benefits: Physical Gold vs. Gold ETFs
| Factor | Physical Gold | Gold ETFs |
|---|---|---|
| Liquidity | Can be hard to sell quickly | Highly liquid, can be traded instantly on exchanges |
| Transparency | Limited price transparency | Offers real-time pricing based on gold market |
| Cost-Effectiveness | Storage and insurance costs | Lower transaction fees, no storage costs |
| Convenience | Requires physical handling | Easily traded through stockbrokers or online platforms |
| Returns | Historically higher returns over long term | Lower returns but offers steady growth |
Expert Opinion on Gold ETFs
Chethan Shenoy, Director & Head – Product & Research, Anand Rathi Wealth Limited, suggests that while SGBs were the best gold investment in recent years, Gold ETFs are now the next best option, especially in 2025. With Gold ETFs offering direct exposure to gold bullion of 99.5% purity, they provide an efficient and flexible way to invest in gold without the hassle of storing physical gold.
Summing Up: Which is Better?
| Investment Type | Return (CAGR) | Pros | Cons |
|---|---|---|---|
| Physical Gold | 5 years: 20% 10 years: 12% 15 years: 11% | Higher returns in the long run, tangible asset | Storage, security, and insurance costs |
| Gold ETFs | 5 years: 13.8%–14.07% 10 years: 10% 15 years: 9.54%–9.62% | Liquidity, transparency, cost-effective | Lower long-term returns compared to physical gold |
Conclusion:
- Physical gold has outperformed Gold ETFs in terms of long-term returns, especially over the last 5 years.
- Gold ETFs, while offering slightly lower returns, excel in liquidity, transparency, and cost-effectiveness, making them ideal for investors seeking convenience and flexibility.
Which Gold Investment Should You Choose?
Your choice between Physical Gold and Gold ETFs depends on your investment goals and preferences. If you seek higher returns over the long term and don’t mind the storage concerns, Physical Gold may be the right choice. However, if you prioritize liquidity and ease of trading, Gold ETFs are a great option to consider.
