Gold out of reach this Diwali? Try these options instead

Summary: With gold soaring to all-time highs, buying the precious metal may seem out of reach. However, there exist affordable ways to invest in gold. Let’s find out.

Two days back, my neighbour, Pallavi, returned from the jewellery store, looking dejected. She had gone to buy a simple gold chain for her mother, something they do every Diwali.

“What’s wrong?” I asked.

“Do you know how expensive gold has become?” she replied with a shocked look, “Rs 1.3 lakh…for 10 grams. At this rate, I will never be able to afford gold in future.”

Pallavi is not alone. Gold has been on a tear, scaling one high after another. Silver has followed suit. Walk into any jewellery shop right now and you'll see families doing mental arithmetic, trying to figure out if they can still afford their annual ritual. Add to that the making charges, which range anywhere from 10 and 30 per cent of the gold value and suddenly that small festive purchase feels like a down payment on a used car.

So here's the question: if you still want gold in your life (or your portfolio) this Diwali, how do you do it without feeling robbed?

The jewellery trap

Let's be honest, buying physical gold as an ‘investment’ has been a bit of a con we play on ourselves. Sure, it feels good. It's tangible, it's pretty, it's something you can pass down. But strip away the emotion and look at the numbers: you're paying extra just for someone to shape the metal into a design you'll probably tire of in five years. And if you want to sell it, the jeweller will knock off that making charge entirely. Purity becomes a negotiation.

And if you've stored it at home, you've spent years worrying about it. If you've put it in a bank locker, you've paid for that privilege. Worse, physical gold doesn’t earn any interest or dividends.

Pallavi loves her gold. But she's also starting to realise they're terrible as actual investments. They're jewellery. They're meant to be worn, not liquidated.

Sovereign gold bonds: The one that got away

There's this investment product that everyone talks about in hushed, reverent tones: sovereign gold bonds (SGBs). And honestly, they are brilliant.

You receive returns that mirror gold prices exactly. What’s more, the government throws in 2.5 per cent annual interest and if you hold your SGBs until maturity, you pay zero capital gains tax. It's like gold, but better.

Suggested read: Life after SGB: Other good options to invest in gold

However, here's the problem: the RBI hasn't issued fresh SGBs since February 2024. Not a single tranche. Your only option is buying them secondhand on the stock exchange, where they are trading at exorbitant premiums. Which sort of defeats the point, doesn't it?

So, what’s left?

With gold jewellery out of reach for many and SGBs not readily available, are there any other ways to invest in the yellow metal?

Enter gold mutual funds and gold ETFs (exchange-traded funds). Unlike your gold jewellery, they are liquid, transparent and most importantly, affordable. Simply put, you don’t have to shell out lakhs of rupees at a time to invest in these funds.

#1 Gold ETF

A gold ETF is simply gold in digital form. Each unit equals one gram of 99.5 per cent pure bullion. Gold ETFs mirror gold prices without the hassle of storage or purity concerns. Traded on stock exchanges, they are liquid and convenient, though prices can swing slightly above or below NAV (net asset value) depending on demand. For investors, it’s one of the smartest, most efficient ways to own gold.

However, keep in mind that since gold ETFs trade on stock exchanges, you need a demat account to invest in them.

#2 Gold mutual funds

Gold mutual funds invest mainly in gold ETFs, but unlike ETFs, they don’t need a demat account and you can buy them directly from fund houses. They’re SIP-friendly, letting you invest small sums regularly and smooth out volatility through rupee cost averaging.

Suggested read: Gold ETF vs gold mutual fund: There's only one right choice!

#3 Gold FoFs

Besides gold funds and ETFs, there’s another way to get exposure to the yellow metal: gold FoFs (fund of funds).

Gold FoFs invest in gold ETFs, giving you indirect exposure to gold without needing a demat account. They’re simple, SIP-friendly and work well for beginners.

However, their expense ratios are a bit higher than those for ETFs, so you pay a little extra for the convenience.

How to actually do this

If you're jumping in to invest in gold now, at these elevated prices, don't go all-in at once. Set up a monthly SIP (systematic investment plan) into a gold fund. Spread your bets. And remember, gold doesn't necessarily grow earnings; it acts as a hedge when the markets are in turmoil. Thus, it is ideal to allocate only a small part of your portfolio (5-10 per cent) to gold.

The smarter Diwali move

Pallavi may still buy that gold chain. Tradition matters, sentiment matters and honestly, her mother will love it. But she's also starting a gold fund SIP this week. Same tradition, but with smarter execution.

Want to know which gold funds or ETFs you should invest in? Subscribe to Value Research Fund Advisor and get a list of our analyst-backed recommendations, so that you can keep the tradition alive and your portfolio smarter.

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Also read: Yes to gold. A big no to gold jewellery. Here's why

This article was originally published on October 18, 2025.