8 December 2025 :A recent analysis by Kotak Institutional Equities has highlighted a significant shift in the investment landscape for gold, stating that gold jewellery is one of the least efficient forms of wealth creation, while financial gold instruments continue to outperform in returns, liquidity, and safety.
The findings come at a time when gold prices are soaring globally, prompting investors to evaluate the best avenues for gold-related investments. While jewellery remains deeply rooted in Indian cultural and emotional values, Kotak’s report underscores that it falls short as a financial investment.
Why Jewellery Performs Poorly as an Investment
Gold jewellery involves multiple layers of costs that diminish its value as an investment asset. These include:
- Making charges (typically 8–25%)
- GST (3% on purchase)
- Wastage charges, which can vary depending on design
- Resale deductions, as jewellers rarely buy back at full value
According to Kotak, these additional costs mean that a buyer immediately loses 10–30% of the value the moment the jewellery is purchased. When gold prices rise, jewellery’s return still lags compared to pure gold or financial gold instruments due to these built-in inefficiencies.
Additionally, jewellery suffers from design-driven value fluctuations, meaning ornate pieces often command higher making charges but do not yield proportional resale value.
Financial Gold: A Superior Choice
Kotak highlights three major financial avenues that outperform jewellery:
1. Gold ETFs (Exchange Traded Funds)
Gold ETFs track the price of 24K gold and involve:
- No making charges
- Instant liquidity
- High transparency
- Low transaction cost
Returns generally mirror global gold prices, making them ideal for short and medium-term investors.
2. Sovereign Gold Bonds (SGBs)
SGBs, issued by the Government of India, offer:
- 2.5% annual interest, in addition to gold price appreciation
- Zero capital gains tax on maturity
- Safe and government-backed structure
Kotak notes that SGBs have delivered the highest real returns among all gold products over the past five years.
3. Digital Gold
Digital gold platforms let buyers purchase small quantities online. Though storage is handled by trustees, Kotak warns investors to choose reputed platforms with proper regulations.
India’s Emotional Attachment to Gold
Despite the poor returns from jewellery, Indians continue to buy gold ornaments for:
- Weddings
- Festivals
- Savings tradition
- Cultural significance
Kotak acknowledges this sentiment but emphasizes the difference between:
“Gold purchased for use” vs “Gold purchased for investment.”
Jewellery falls into the former category and should not be mistaken for a wealth-building asset.
Return Comparison Over 10 Years
Kotak’s study compared ₹10 lakh invested in different forms of gold a decade ago. Approximate outcomes:
- SGBs: ~₹27 lakhs
- Gold ETFs: ~₹24 lakhs
- Gold coins/bars: ~₹22 lakhs
- Gold jewellery: ~₹15–17 lakhs after accounting for resale losses
The difference clearly showcases how jewellery underperforms due to its structural inefficiencies.
High Global Prices Driving More Financial Gold Demand
With geopolitical tensions, inflation uncertainty, and weakening global currencies, gold is emerging as a safe-haven asset once again. Kotak states that investors should avoid emotional buying and instead opt for gold assets that offer high purity, transparency, and market-linked returns.
The report mentions that Indian households own over 25,000 tonnes of gold, the majority of which is in jewellery form. This huge physical stockpile remains locked in vaults and contributes very little to financial growth.
Expert Recommendations
Kotak analysts recommend:
- Using gold jewellery strictly for consumption (weddings, wearables).
- Choosing SGBs for long-term investment.
- Choosing ETFs for short- and medium-term diversification.
- Avoiding jewellery for wealth creation due to high frictional costs.
They also warn against overexposure to gold, suggesting it should form 8–12% of a diversified investment portfolio.
Consumer Takeaway
The report reinforces a clear message:
If the goal is investment, choose financial gold, not jewellery.
Jewellery’s emotional value remains high, but financially, it erodes returns. In contrast, SGBs, ETFs, and digital gold provide transparency, liquidity, and price-linked appreciation—making them far superior options.
Summary
Kotak reports that gold jewellery is a poor investment due to high costs and low resale value, while financial gold—especially SGBs and ETFs—offers significantly better returns, liquidity, and long-term wealth creation.