Gold bars, coins: Factor in premiums, making charges and GST costs

Indians continue to favour physical gold for tradition and security, but ETFs offer a more efficient, low-cost route for long-term investment

Indians bought 62 tonnes of gold bars and coins in the January-March quarter of 2026, far higher than the 20 tonnes of net demand for gold exchange-traded funds (ETFs) and close to the 66 tonnes of jewellery demand, according to the World Gold Council’s Demand Trends: India Focus report for the January-March quarter of  2026. These numbers show that many investors continue to favour physical gold, despite the availability of regulated, transparent, and easier-to-trade financial products. 

Appeal of physical gold 

Gold bars and coins remain deeply embedded in India’s saving culture. For many investors outside metros, physical ownership provides psychological comfort. “Physical gold resonates because it allows people to touch and feel and own a physical and tangible asset,” says Gnanasekar Thiagarajan, director, Commtrendz Research. 

The appeal of gold bars and coins also stems from emotional value, traditions, and rituals. “Purchasing physical gold is regarded as auspicious during festivals,” says Ajay Suresh Kedia, director, Kedia Advisory. Many families buy gold on occasions such as Diwali and Akshay Tritiya. 

Physical gold also provides a sense of security. This is most apparent during uncertain times, such as demonetisation or periods of financial stress.  

Investors regard it as a store of value over the long term. “Gold has always been viewed as a hedge against inflation,” says Colin Shah, managing director, Kama Jewelry. 

“Families also regard it as a medium for the intergenerational transfer of wealth,” says Prashasta Seth, chief executive officer (CEO), Prudent Investment Managers. 

Recent strong returns from gold, which is up 59.2 per cent over the past year and has delivered 15.3 per cent annualised return over the past 25 years, have also led to high purchases of gold bars and coins. 

Why bars and coins appeal more than ETFs 

Even as an investment instrument, many investors prefer bars and coins over gold ETFs. “This is because many give higher weight to emotional value over pure investment efficiency,” says Kedia. 

Buyers also value the privacy they offer at the time of purchase. “They offer direct ownership, without having to go through intermediaries,” says Prasanna Pathak, deputy CEO, The Wealth Company. The purchase does not carry counterparty risk.

Bars and coins are also useful for gifting and for obtaining emergency liquidity. They are more price-efficient than gold jewellery. “Jewellery has higher making charges, and there is a wider spread when sold in times of need,” says Thiagarajan. 

Bars and coins have lower making charges than jewellery. Investors can get a higher resale value due to minimal deductions at the time of selling.  

Bars and coins are usually available in 24-carat or 999 purity, unlike jewellery, which is often 22-carat or lower. They also offer flexibility, as owners can convert them into jewellery whenever required.  

Costs erode returns 

Investors should not, however, treat physical gold as a zero-cost investment. “Premiums over the market price typically range from 2 per cent to 10 per cent, depending on the size and brand,” says Kedia. Bars generally have lower premiums than coins, and smaller bars usually carry higher premiums than larger bars. 

“Coins also involve minting charges, which can range from 8 to 16 per cent,” says Thiagarajan. 

Buyers also have to pay 3 per cent goods and services tax (GST) on gold bars and coins. Branded or tamper-proof products carry packaging charges. Storage adds to the cost. A locker can cost around ~2,000 to ~15,000 a year. “This asset type also comes with insurance costs,” says Shah. 

When buyers sell bars and coins, they lose the making charges. They also face a buyback spread. “This means that the seller offers a price below the prevailing market rate,” says Kedia. 

All these costs mean that bars and coins are not the most efficient route for investment.  

ETFs suit investment better 

Gold ETFs suit investors who want a pure investment vehicle for a long-term financial portfolio. Their pricing is transparent. “Investors get real-time pricing on the exchanges,” says Seth. Gold ETFs are also liquid. Since they are exchange-traded, investors can buy or sell them easily throughout the day. Investors also do not have to worry about purity or storage-related concerns. 

Gold ETFs are also low-cost products. The expense ratio of gold ETFs and fund of funds ranges from 5 to 80 basis points (one basis point is one-hundredth of a percentage point). 

Since they are financial instruments, gold ETFs integrate easily into a disciplined asset-allocation strategy. Investors can also rebalance more easily through them. 

“However, they are exposed to market risks and do not offer the touch and feel that Indian investors associate with gold,” says Shah. 

Physical gold or ETFs: What should you buy? 

Buyers should first define the purpose of the purchase clearly. “Investors buying gold for cultural reasons or gifting, or those who prioritise tangible ownership, should go for physical gold,” says Seth. 

He adds that investors seeking disciplined portfolio allocation and wealth creation may be better served by regulated avenues such as gold ETFs. 

A combination may also work. “Physical gold can meet cultural and behavioural needs, while ETFs can serve the investment allocation role,” says Pathak. 

Buy from trusted sources 

Traditionally, buyers in India have purchased gold bars and coins from local jewellers because of trust and familiarity. That approach is not foolproof. 

“Buyers should limit purchases to BIS-hallmarked products from reputed jewellers, banks, and government-backed outlets,” says Pathak. 

Banks offer certified coins and bars. Trusted institutions such as MMTC-PAMP may also be considered. Shah adds that well-known jewellers can provide better transparency, consistency, and buyback confidence. 

The writer is a Mumbai-based independent journalist

Pre-purchase checks 

•    Verify purity, weight, hallmarking, invoice details, and buyback terms before purchase

•    Check BIS hallmarking and verify authenticity through the BIS Care App

•    Ensure the invoice mentions weight, purity, price, GST, making or minting charges, and other applicable charges

•    Confirm the seller’s buyback policy, including resale price, deductions, required documents, and repurchase terms