In a discussion on gold investing, financial experts broke down how Indian investors should think about gold allocation, the rise of digital gold instruments, and the growing relevance of newer regulated products like Electronic Gold Receipts (EGRs), alongside established options such as Gold ETFs and multi-asset allocation funds.

The discussion came against the backdrop of a recent public appeal by Prime Minister Narendra Modi on reducing dependence on physical gold and avoiding purchasing gold jewellery for a year.

In a conversation with Zee Business, Vikas Puri, Senior Partner at Complete Circle Capital and Nisha Sanghavi, Certified Financial Planner, shared their key insights on gold investment and allocation strategy.

How much gold should you hold in your portfolio?

Experts emphasised that gold should remain a limited allocation within a diversified portfolio, rather than becoming a dominant asset.

Sanghavi stated that Indian households are traditionally “gold-heavy” due to cultural buying patterns linked to weddings and festivals, but warned that investors should maintain discipline.

She recommended that gold exposure should ideally not exceed 10–15 per cent of a total investment portfolio, noting that while gold acts as an inflation hedge and diversification tool, excessive allocation can reduce long-term portfolio efficiency.

Experts agreed that gold continues to serve two key roles:

• Protection against inflation
• Portfolio diversification during market volatility

However, they also stressed that investors should not treat gold as a primary growth asset compared to equities.

Puri explained how India’s traditional method of buying gold—through jewellery, coins, or bars from jewellery stores—is gradually being replaced by digital and regulated investment formats.

He noted that earlier, investors had limited options and primarily depended on physical gold purchases, but the market has now evolved significantly with:

• Gold Exchange-Traded Funds (Gold ETFs)
• Digital gold platforms
• Government-backed instruments like Sovereign Gold Bonds (SGBs)
• Newly introduced Electronic Gold Receipts (EGRs)

According to Puri, digital gold instruments address multiple challenges associated with physical gold ownership.

He highlighted key advantages:

Investors can buy gold in very small amounts without visiting jewellery stores, avoiding the discomfort often associated with small-value physical purchases.

2) Small-ticket investing

Digital instruments allow investors to start with very low amounts, even enabling fractional exposure through ETFs.

Unlike physical jewellery, where purity verification can be uncertain, digital gold ensures standardised quality.

Investors avoid locker charges, home storage risks, and associated security concerns.

5) Lower transaction friction

Buying and selling is easier compared to physical gold, where liquidity can be restrictive.

Investors can sell fractional units easily, unlike physical gold, where partial liquidation is not possible.

Gold ETFs were described as one of the most established and accessible digital gold instruments.

Sanghavi said Gold ETFs have long served as a starting point for Indian investors entering digital gold investing, especially because they can be purchased in small quantities and held in demat accounts.

She added that she herself began investing in Gold ETFs early in her career, using small portions of her salary to gradually build exposure over time, without needing physical storage or visiting jewellery stores.

Experts explained the progression of gold investment instruments in India:

1) Physical gold (traditional jewellery and coins)

2)Gold ETFs (first step into digital investing)

3) Sovereign Gold Bonds (government-backed, tax-efficient instrument with lock-in benefits)

4) Electronic Gold Receipts (latest SEBI-regulated product)

A major focus of the discussion was Electronic Gold Receipts (EGRs), recently introduced in the Indian market.

• Puri explained that EGRs are structured as dematerialised gold-backed instruments listed on exchanges such as the National Stock Exchange of India.
• He detailed the structure of the system:
• A depositor (regulated entity approved by the Securities and Exchange Board of India) deposits physical gold in secured vaults
• Depositors may include banks, bullion traders, refiners, or institutional participants
• Against this vaulted gold, EGRs are issued
• Investors can trade EGRs on exchanges similar to shares

He further explained that EGRs are issued in standardised denominations such as 1 gram, 10 grams, and 100 grams, with purity typically around 995 or 999 fineness levels.

Puri highlighted an important structural difference between ETFs and EGRs:

• In Gold ETFs, investors buy fund units, and fund managers then purchase underlying gold
• In EGRs, physical gold is first deposited in vaults, and EGRs are issued directly against that gold
• This reverse structure, he explained, brings the instrument closer to direct ownership of vaulted gold.

One of the most significant advantages of EGRs, according to experts, is the ability to convert digital holdings into physical gold.

Puri explained that investors can, after holding EGRs for a period, opt for physical delivery of gold from authorised vaults or through approved jewellers.

This feature fills a long-standing gap in Gold ETFs, where investors typically only receive cash equivalent on exit rather than physical gold.

He added that in physical delivery cases, investors may only need to pay minimal GST-related charges.

The discussion also covered multi-asset allocation funds as an alternative approach.

Sanghavi explained that these funds invest across multiple asset classes, including:

• Equity
• Debt
• Arbitrage strategies
• Gold and silver
• In some cases, global equities

She said that for investors who prefer a single-fund solution without active timing decisions, multi-asset funds can be an effective option because fund managers dynamically rebalance allocations based on market conditions.

However, she cautioned that investors seeking precise gold allocation targets (eg, 10–15 per cent) may not achieve exact exposure, as gold is only one component within a broader portfolio.

Puri added that during strong gold rallies, fund managers often increase or decrease gold exposure dynamically, which can benefit returns but may not align with strict allocation discipline.

Experts also pointed out a limitation:

Because multi-asset funds include equity and debt alongside gold, the exact gold allocation at the portfolio level may get diluted.

Therefore, investors aiming for pure gold exposure may still prefer:

• Gold ETFs
• EGRs
• Or direct gold-linked instruments

Experts reiterated that gold should be treated as a supporting asset rather than a primary investment driver.

• Maintain 10–15 per cent allocation discipline
• Use regulated instruments like Gold ETFs and EGRs
• Consider multi-asset funds for simplified exposure, but understand allocation dilution
• Align gold investment with long-term financial goals and risk appetite