Does it make financial sense to invest in Gold on Akshaya Tritiya?

Buying gold on ‘Akshaya Tritiya’ is considered as auspicious by many Indians and is being followed for many years. It is considered that buying gold on ‘Akshaya Tritiya’ is likely to bring good luck. Time has changed but not the tradition. Now there are many ways of investing in gold. In addition to physical gold, there are other avenues such as gold exchange-traded funds (ETFs) and Sovereign Gold Bonds (SGBs) through which you can take exposure to gold.

You can invest in SGBs through banks, Stock Holding Corporation of India, some of the post offices, and stock exchanges like NSE and BSE. Investing in SGBs will entitle you to an interest rate of 2.5 per cent per annum. However, they are not available ‘on-tap- basis’ that is you cannot buy them anytime. The government does not sell SGBs quite often and if you want to buy, it is available through exchanges.  Nonetheless, currently it is available and the government is selling the SGBs at price of Rs. 3,114 per gm of gold. The bonds will be issued on May 4. The issue price of the Gold Bonds will be Rs. 50 per gram less for those who subscribe online and pay through digital mode. For such investors, the issue price of Gold Bond will be Rs. 3,064. One of the advantages of investing in gold through SGB's is that gains are exempted on maturity. Nevertheless, in exchanges, they are available at discount and hence if you want to exit it before it matures you may have to sell at discount.

Another way of buying gold is through gold ETFs. You can buy and sell these from stock exchanges where gold is an underlying asset. You should have demat account to buy ETFs.

Although investing in gold has a different motivation, if we look purely from a return perspective, the returns have not been exciting. To analyse this, we took the daily price of gold since 1980. We assume that you have invested Rs. 1,000 in gold on every Akshaya Tritiya. In the last 38 years if you had invested total Rs. 38,000, the value of the same would have been is Rs. 3,38,453 giving an XIRR of 9.355%. In a different scenario, where if you had invested Rs. 38,000 on April 17, 1980 in gold, the value of your investment would have been Rs. 8,08,653 giving an XIRR of 8.373%. Although, the value is greater in lump sum, the return, considering the time value of money is lower in case of lumpsum investment.

Therefore, we suggest you continue the tradition of buying gold on ‘Akshaya Tritiya’ as it also makes financial sense.

Value of gold and 'Akshaya Tritiya' since 1980