Pulling off a classic Scrooge McDuck (from Disney series Duck Tales) to swim through heaps and heaps of gold coins hidden in his volt might be a fantasy for many but it is not the best of the idea at least in terms of investment.

For generations, gold has been a favourite form of investment, especially during the time of domestic or international turmoil. And looking at the current political scenarios, these are not the best of the times.

The increasing power struggle between the US and China has heightened the geo-political tensions among the powerful countries. Back home, things are also far from promising with markets refusing to pick up pace even after a majority government was formed last June. Such fear factors have once again brought gold to the forefront as far as investment is concerned.

As per financial analyst, the prices will continue to push further globally as the US-China trade war continues to drag. The price target for gold for the Indian market in the calendar year 2019 will be Rs 34,000 for 10 gms while the long-term (one to three years) price target would be Rs 37,000 per 10 gms. A firm bullish trend in the gold prices is expected to last for a fairly longer period (four to six quarter). In such cases, what are the investment options available for small investors and how should they proceed?

There are several ways to invest in gold. They include buying and selling of physical gold, gold futures and options, gold exchange traded funds (ETF), gold sovereign bonds and e-gold. Each option has its advantages and disadvantages.

Physical gold has the highest amount of risk when compared to other options. Traders and investors who are ready to take up the risk can buy gold in its physical form. Gold ETFs, considered as one of the safest form of investment in gold, provide the option of holding gold in electronic form, avoiding problems of storage. The tax treatment also gives gold ETFs an advantage over the bullion.

Moreover, we can buy gold units equivalent to even half a gram of physical gold, allowing us to invest smaller amounts in the precious metal. Monthly scheme of gold investments, also known as systematic investment plan, serves as a low-risk investment tool for gold. For monthly schemes, an investor does not require a demat account, which is required in case of ETFs. However, this convenience comes at a slightly higher cost in form of annual expenses of around 1.5% of asset under management, whereas it is around 1% for gold ETFs. To conclude, both gold ETFs and monthly schemes are better than the other options. However, it all depends on the investor and his risk appetite.

However, sovereign gold bonds are the best choice for small investors in India. Financial analysts opine, one gets the full price of gold when he or she sells it. On top of it, one gets 2.5% rate of interest. The buying and selling happen at wholesale price, so small investors do not have to worry about the cut in price. You don’t have to worry about storage cost, insurance cost or purity of the metal.

Analysts also opine gold is a disciplined asset and it has storage value. It does not give you extraordinary returns, but it ensures that it protects your capital. Investors should keep maximum of 10% of total portfolio investment in gold. It will be able to beat inflation at the international level.

Disclaimer: Opinions and views mentioned above are of author. Also, events mentioned in the article may be older and not as per the current situation. Make your decision after consulting an advisor.