Buying gold every Dhanteras pays off, but how you buy it can impact returns

For those who buy gold every Dhanteras, it has proved to be a rewarding investment over the long term. Over the past 20 years, gold has delivered an annualized return of 14.6%. In the past two years alone, it has gained almost 76%, even after declining about 22% from its January 2026 peak of about ₹17,800 per gram.

However, growth has been uneven. Gold purchased in 2006 delivered an annualized return of 25% over the next five years, whereas gold bought in 2012 yielded a negative annualized return of 1.1% over five years. From 2012 to 2017, its price fell from ₹3,094 per gram to ₹2,924 per gram.

Despite these fluctuations, gold has beaten inflation over the long term and remains useful for portfolio diversification. However, just buying gold every year may not help you realize the full value of its price movement. Different forms of gold—coins, jewellery, gold exchange-traded funds (ETFs) and digital gold—carry different costs, risks and selling conditions that affect actual returns.

Option galore

Gold buyers today have more options than coins and jewellery. Digital platforms allow small purchases through digital gold and systematic investment plans (SIPs) in gold mutual funds. Here's how the options compare.

Gold coins: Coins are a popular Dhanteras purchases. E-commerce and hyperlocal platforms have made buying even easier, with credit card discounts as an added pull. However, coins carry 3-5% making charges and 3% GST, taking upfront costs to 6-8%.

Selling adds further costs. Most jewellers buy back only their own coins, deducting 3-5% from the prevailing gold value. Combined with purchase costs, that's a loss of 9-13%. Smaller jewellers may accept other brands' coins but deduct 7-8%, taking total costs up to 16%.

Buying coins every Dhanteras makes sense if you intend to purchase jewellery later. As an investment, however, they carry among the highest costs, which can eat into the returns from gold's price appreciation.

Gold ETFs: Gold ETFs track gold prices and investors can buy and sell them on stock exchanges through a demat account. Regulated by the Securities and Exchange Board of India (Sebi) and backed by physical gold, they eliminate storage concerns.

Costs include annual expense ratios, brokerage, demat maintenance charges and any premium over the underlying gold value.

Urvil Modi, founder and CEO of Samriddhi Wealth Management and a Sebi-registered investment adviser, recommends comparing ETFs on tracking difference and liquidity. Tracking difference measures how closely fund returns follow the benchmark, while higher trading volumes generally allow easier transactions. Between the two metrics, Modi says liquidity should be given preference.

Dhirendra Kumar, founder and CEO of Value Research, also favours large, liquid gold ETFs, but cautions against higher premiums in ETFs this Dhanteras.

“Normally, when buyers crowd in during festive periods, large players create new units and keep the price pinned to the gold's value. But this year, with fund houses having stopped bulk subscriptions and shut their gold FoFs (fund of funds) on Sebi’s nudge, new units are not being created freely, so an ETF can trade above the value of the gold inside it,” he said.

Investors should compare the ETF's trading price with its indicative net asset value (iNAV) before buying.

Digital gold: Digital gold allows investors to buy gold in small amounts through payment apps and other online platforms. Providers say equivalent physical gold is stored with vault partners, eliminating personal storage. The biggest pull of digital gold is the convenience of investing small amounts and no hassle of personal storage.

However, digital gold is unregulated, and investors depend on platforms, gold providers and custodians to safeguard holdings and honour redemptions.

Since physical gold is bought at the back end, buyers pay 3% GST on each purchase. Moreover, customers pay a spread between the selling and buying prices. Rhea Chaterjee, co-founder and COO of SafeGold, said prices reflect domestic and international market feeds and demand.

“On SafeGold, the spread varies between 2.2%-3%,” she said.

Mint’s research found higher spreads of 4-6% on third-party apps including PhonePe, Paytm, Gullak and Amazon Pay, which source gold through providers such as MMTC-PAMP, SafeGold and Augmont. Investors selling soon after purchase could therefore incur losses even without a fall in gold prices.

Digital gold can be sold through the platform or redeemed for physical gold. Given the regulatory vacuum, experts consider it convenient for gifting and small purchases.

“I would advise against using it for long-term investments because of its costs and lack of regulatory oversight,” said Kumar.

Gold SIPs and sovereign gold bonds: Both Gold SIPs and SGBs are not an option for new investors this year. Fresh SIPs in several gold FoFs have been suspended since 16 October, though existing SIPs and redemptions continue.

Some digital gold platforms offer recurring purchases of digital gold marketed as gold SIPs. These carry the same costs and regulatory risks as digital gold, and investors should not confuse the SIP label with SIPs in FoFs.

SGBs are now available only in the secondary market as the Reserve Bank of India stopped fresh issuances. Previously attractive for their 2.5% annual interest and tax-free maturity gains, their appeal has diminished following Budget 2026.

Secondary-market buyers now face 12.5% tax on long-term capital gains and slab-rate taxation on short-term gains, even if bonds are held until maturity.

“SGBs were a better product over ETFs, but the government withdrew it, which says a lot about how long you can rely on any gold product,” said Kumar.

Limiting gold

Despite gold’s promising long-term returns, experts recommend limiting gold to 10-15% of a portfolio, primarily for diversification.

“Gold earns its place in an investment portfolio because it is unlike equity or debt. It has no cashflows; it can’t be valued in the usual sense and its correlation with equity is generally low. That is why it can help when other assets are struggling,” said Dev Ashish, founder of Stable Investor, an investment adviser.

Gold pays off over the long term by reducing portfolio volatility.

“The primary role of gold in a portfolio is to be that of insurance. A case in point is the 2008 market fall. A 100% equity portfolio (Nifty 500) took 75 months to recover to its pre-2008 crisis peak, whereas an 85/15 equity-gold portfolio took 30 months,” said Modi of Samriddhi Wealth.

Experts emphasized that gold should not be seen as a short-term bet on price movement, especially because of the rally of the past two years.

“While over long periods, gold has roughly kept pace with inflation, over any five-year stretch it can lose a third or gain two-thirds. This year is the lesson,” said Kumar.

“With no cashflows to anchor its price, it is driven primarily by demand-supply and geopolitics,” said Ashish. “This can lead to gold not going anywhere for years and then rally suddenly for a short period.”

Permanent horizon

Kumar said the right horizon to hold gold is permanent as it is a hedge you hold through everything, and not a bet you make when it is in the news.

As for how to invest in gold, ETFs generally offer a better combination of cost, regulation and liquidity than physical coins or digital gold. An alternative to direct gold products is multi-asset mutual funds.

Modi said these are a good way to have exposure to gold in a tax-efficient way without worrying about sudden stoppage of acceptance of inflows by asset management companies.

“For most investors, MAFs (multi-asset funds) are good enough. Standalone exposure through other products makes sense only when the overall portfolio grows bigger,” Modi said.