#AD
Since historic times, Gold has played a crucial role in the country’s culture. While ancient India associated gold as jewellery or a symbol of status, modern India uses Gold as an investment vehicle. If we take a look at historic gold prices, gold has given 11-13% returns annually. Experts predict that gold prices will touch 62,000 this year(2023). Due to the stability and potential to earn high returns, gold investments have become popular among both experienced and retail investors. Gold investments have been an investor’s best friend during times of economic crisis and protect them against inflation as well.
While the majority of investors invest in either Gold Bonds, Gold ETFs and digital gold – the new option of gold leasing is something that one could consider in their portfolio. Let’s see how gold leasing works and whether you should invest in it.
Gold leasing
So, what is Gold leasing? As the term suggests, it is a practice in which you lease your Gold to verified jewellers who use it for their business needs and you gain an interest (or) rental payment on your Gold from the jewellers. Throughout this process, you remain the owner of the Gold.
Gold leasing has been existent in India for a long time but was only accessible to a select few in the offline market. With the rise of innovation in tech & fintech apps like Gullak, this practice has become an investment opportunity to the entire market. With their new feature, Gold+, Gullak gives investors the opportunity to lease their owned gold to verified jewellers and earn additional 5% interest per annum in the form of gold. Along with the historical gold returns of 11% & the extra 5% makes Gold leasing a 16% asset class. With returns as high as upto 16%, this could soon become an investor’s best choice among other Gold investment options. With apps like Gullak, investors also get a 100% bank guarantee on the leased gold. All the jewellers are verified by Augmont(Gullak’s Gold partner), one of India’s largest refineries.
How does it compare to other gold investment options?
An easier approach to understanding the benefits of Gold leasing would be comparing it against the popular gold investment options in India.
|
Category |
Gold Leasing | SGB | Gold ETFs |
| Returns | 11%(Gold Price appreciation)+ 5% (Extra in gold) | 11%+2.5% extra(in INR) | 11%(Gold price appreciation). |
| Investment type | Physical gold(digital record) | Bond papers | Similar to stocks |
| Extra returns | 5% extra gold 5% extra is compounded | 2.5% extra(in INR) 2.5% extra is simple interest | No extra returns |
| Withdrawal | Anytime(with Gullak Gold+) | 8 years lock-in. Can be sold in secondary markets but at 7-8% discount You can also withdraw at 5 years however you won’t get any benefits of capital gains tax in that case | Anytime |
| Returns in INR after TAX (considering all tax benefits, GST, buy/sell spread) |
257% returns after 8 years | 244% returns after 8 years | 207% after 8 years |
| Returns in Gold metal after TAX | 299% returns after 8 years | 237% returns after 8 years(user has to pay GST for converting it to metal) | No such option |
Should you lease gold?
Being a relatively new investment option, one might be sceptical on whether or not to lease gold. In this section, we will go over queries investors might have on gold leasing.
Is it safe?
Although digital gold is not regulated by SBI, the entire process is legal & is run by large refineries such as Augmont who are NABL, BIS accredited & a member of India Gold delivery standard on NSE, BSE. Augmont is the same partner that apps such as Gullak use for Gold leasing & storing customers Gold. To ensure the safety of investors’ money, apps like Gullak provide a 100% Bank guarantee on the leased gold. A bank guarantee is an instrument through which a lending institution (such as a bank) guarantees to return the principal(leased Gold) if a leasee (such as a jeweller) defaults on a lease. They do this by taking a collateral equivalent of the INR value of the leased quantity. This would mean your leased gold is safe and accounted for. In Gullak’s case, all the jewellers are vetted by Augmont – one of the largest gold refineries in India Is there any charge or minimum amount to lease gold?
Although there are no additional charges, users generally need to have a minimum of 0.5 gms to lease gold.
Lock-ins?
There are no lock-in periods with Gullak’s Gold+. Investors can un-lease their gold anytime. Returns are calculated daily and are credited on a monthly basis. If investors un-lease before that, they are credited with the interest accumulated for the leased tenure(pro rata)
Finally, should you lease your gold? Although gold leasing is a relatively new investment option. But it seems to be a lucrative one. With Gold as the underlying asset, it offers stability and the opportunity to earn more on your gold investments. It beats returns from any other gold investment options and returns from a lot of the popular investment options like P2P lending and a lot of mutual funds. Investors who want high returns and have some risk appetite can definitely consider gold leasing into their portfolios in 2023.
FAQs:
1. What are the returns on Gold leasing?
Gold leasing gives investors the opportunity to earn 5% extra gold on top of gold price increase(average 11%). Combined, these make the total returns from leasing as 16%.
2. Is there any lock-in for Gold leasing?
When using Gullak gold+ for gold leasing, investors do not need to worry about lock-in periods. They can un-lease their gold anytime.
3. How to lease your gold?
Investors can lease their gold by using applications like Gullak. Their new feature, Gold+ allows them to invest in this high return investment asset.
4. Gold leasing vs SGB, which is better?
We have already compared gold leasing vs SGBs and other gold investment assets in the previous section. To give a short summary to compare Gold leasing vs SGBs,
- Gold leasing gives 5% extra returns, while SGBs give 2.5% extra returns
- In case of gold leasing the extra returns get compounded, while in case of SGBs the extra returns are on the principal amount
- In gold leasing, the extra returns are in the form of gold grams, while in SGBs the extra returns are in the form of INR.
5. Is gold leasing safe?
- On apps like Gullak, all the jewellers are verified by Augmont, one of India’s biggest gold refineries. Investors are also provided with a 100% bank guarantee on the invested amount to ensure security.
Helpful update.