What Is Gold Leasing? The Better Way To Invest In Gold

Gold leasing

In a world where traditional investments usually grab attention, Gold leasing stands out as a unique and innovative option. Whether you’re an experienced investor, just starting out, or saving up for jewelry, Gold leasing might be the opportunity you’ve been waiting for.

Gold leasing

Let’s take a closer look at the world of Gold leasing and how it can be a valuable addition to your investment choices.

(A) What is Gold Leasing?

Gold has been an invaluable and noble metal since the ancient era. Hence, gold became synonymous to wealth. Ever heard of Gold leasing to increase your wealth? It’s a clever way to make your digital Gold work for you. Look, you lease out your digital Gold to trusted jewellers who use it as working capital, and in return, they hand you a monthly interest. 

Sounds complicated? Let me break it down in simple terms.

Imagine leasing 100 grams of Gold. In the first year alone, you get an extra 5 grams. Now, you’re holding a dazzling 105 grams of Gold, and every bit of it gets to enjoy the perks of Gold price appreciation.

Take it a step further. 

Leave your 100 grams of Gold in the Gold leasing game for 8 years, and voila! You end up with an extra 48 grams. That means you’ve got a grand total of 148 grams of Gold, all basking in the glow of Gold price hikes. In terms of INR, if you initially invest 6L, you’d walk away with a hefty 20.4L after 8 years.

Go through the following table and you will understand the concept-

Amount of Gold leasedExtra Gold Obtained
(11% CAGR)
Time PeriodWorth in INR
100 gm5 gm0 YearRs.6,00,000
105 gm5.3 gm1 YearRs.6,99,330
110 gm5.5 gm2 YearRs.8,15,034
116 gm5.8 gm3 YearRs.9,49,922
122 gm6.1 gm4 YearRs.11,07,134
128 gm6.4 gm5 YearRs.12,90,365
134 gm6.7 gm6 YearRs.15,03,921
141 gm7 gm7 YearRs.17,52,891
148 gm7.4 gm8 YearRs.20,42,911
Gold Leasing: A Brief Overview

Gold leasing isn’t a new concept—it’s been around for years, but previously, it was a bit exclusive, known only to those with well-connected jeweller pals. Fast forward to today, and Gold leasing is going digital and accessible to everyone.

To sum it up, your digital Gold gets leased to reputable jewellers who need it for their day-to-day operations. In return, these jewellers shower you with a monthly interest in Gold grams. Think of it like renting out your house and enjoying rental income, but with a shiny twist.

(B) Synopsis of Gold leasing & Gold investment landscape in India

Before diving deeper into the concept of Gold leasing, let’s navigate through the gold investment landscape in India-

(B.1) Gold’s Impressive Growth Over Time

In the compelling world of Gold investment in India, its Compound Annual Growth Rate (CAGR) has consistently outshone expectations. Over durations of 1, 3, 5, 10, 15, 20, and 30 years, Gold has demonstrated a remarkable CAGR exceeding 11%.

(B.2) Gold vs Nifty: A Winning Streak

Let’s unveil the statistics that reveal Gold’s supremacy over the Nifty index. In the past 5 years, Gold has triumphed over Nifty returns in 4 out of 5 instances, showcasing its resilience and attractiveness as an investment avenue.

(B.3) Global Trends: Central Banks’ Gold Rush

You will see a fascinating global scenario of Gold reserves. In 2022, central banks worldwide accumulated Gold reserves at an unprecedented pace, reminiscent of the Gold-backed US dollar era in 1967. 

The demand for Gold surged by a notable 28% in the September quarter of 2022, as reported by the World Gold Council. This surge is attributed to a heightened preference for safer assets amid surging inflation.

(B.4) Projections for Gold Prices in India

Here is a scoop from Indian experts who predict Gold prices reaching a staggering 62K this year. With looming concerns about a global financial crisis, international experts echo predictions of Gold soaring over the next 5 and 10 years, making it a promising investment avenue for the future.

(C) A Guide to Gold Leasing: How to lease Gold in India?

In this section, we will embark on a journey into the world of Gold leasing in India, a simple yet innovative way to make your digital Gold work for you. Let me summarise the concept of gold leasing again. The process involves leasing your Digital Gold to trusted jewellers. 

They hold onto it for a specific duration, integrating it into their daily business operations. The catch? 

Throughout this leasing adventure, you retain ownership of your precious Gold. The jewellers, in turn, are obligated to pay you interest for the borrowed Gold.

(C.1) What makes Gold Leasing so simple?

The simplicity of Gold leasing lies in the fact that they are entirely digital. Just like stocks! It is highly unlike their physical counterparts that involve tangible Gold coins, bars, and intricate dealings with dealers. No fuss, just a straightforward process that opens up a world of investment possibilities.

(C.2) Participants of Gold Leasing: Who can dive in?

Wondering if you’re eligible for this golden opportunity? All you need is to be at least 18 years old, possess a valid PAN Card number, and maintain an active bank account. Whether you have 0.5 grams or 20 grams of digital Gold, you’re ready to take the plunge into the realm of Gold leasing.

(C.3) Monthly Rewards in Gold Grams

Here’s the exciting part – every month, you receive payments in grams of Gold credited directly to your account. As the lease period unfolds, both the principal amount and your profit earnings accumulate, culminating in a final amount that reflects the fruits of your digital Gold lease.

(C.4) Your Options at the Lease Finish Line

As the lease period concludes, you hold the reins. Decide whether to renew your lease for another round, sell off the Gold, or indulge in the joy of having it delivered to your doorstep as tangible coins or bars. The power is in your hands.

That’s how your digital Gold transforms into a source of monthly rewards and investment flexibility. Gold leasing in India is not just an option; it’s your passport to a world where your Gold works tirelessly for your financial goals. 

But, wait!

It is not always the sunny side. It has a dark scenario too! Really? Yes, go on reading this write-up and you will see the dark and risky side of gold leasing in the upcoming sections.

(D) 5 Crucial Things You Must Know About Gold Leasing

Features of Gold Leasing

You must not skip this section. Reason? Go through the following points and you will find out-

(D.1) Extra Returns: A Golden Opportunity

Picture this scenario. You lease out 100 grams of Gold, and in return, you receive an enticing 5 grams of extra returns every year. The beauty is, this extra Gold not only appreciates with the rising Gold prices but also benefits from the power of compounding, making Gold leasing a lucrative investment choice. The potential for up to 16% returns surpasses Gold’s CAGR of 11%, even outshining returns from mutual funds.

(D.2) Do you have a Bank Guarantee?

Let me tell you what the agents of gold leasing say-

Rest easy knowing that a 100% bank guarantee is secured from jewellers against the leased quantity. As the Gold prices soar, an additional bank guarantee is collected, ensuring your investment’s safety. 

Key players like Augmont and Auspicious by RSBL are trusted lease partners. Augmont, the 3rd largest Gold refinery in India, boasts NABL and BIS certification, while Auspicious by RSBL, with a turnover of Rs. 25000+ Cr, stands as the largest bullion player in India.

Sounds good! Isn’t it?

But let me tell you the flip side too.

The primary concern associated with gold leasing lies in its lack of regulation, leaving investors without a recourse option in case of losses. Another potential risk arises when dealing with jewellers, as their default could pose a threat to your investment. 

While platforms now assert obtaining bank guarantees from jewellers, serving as a safety net if a jeweller fails to repay the principal amount, it’s crucial to note that these guarantees cover 100-110% of the total gold quantity leased. 

While this provides a sense of reassurance, it’s essential to be cautious. In the event of a surge in gold prices followed by a jeweller default, the recovery of your gold may be limited to the amount covered by the bank guarantee.

So, give it a thought!

(D.3) Additional Charges of Gold Leasing

Yes, there are GST charges involved due to the digital nature of Gold leasing, but fear not—these are one-time charges. Despite the additional costs and taxation, the extra 5% returns in Gold grams outshine other Gold investment options significantly.

(D.4) Flexibility at its Core: Tailoring your Investment

Starting small is not just an option; it’s encouraged. You can kickstart your Gold leasing journey with as low as 0.5 grams and even set up monthly SIPs. Plus, you have the flexibility to choose the duration of your Gold lease, allowing you to align your investment with specific goals and timelines.

Whether you’re an alternative investor seeking high returns, someone looking to diversify their Gold portfolio, a beginner starting small, or even a savvy saver eyeing that dream jewellery, Gold leasing suits all. The simplicity, high returns, and flexibility make it an appealing option for a diverse range of investors.

However, be aware of the risk factors too!

(E) Benefits of Gold Leasing

Benefits of Gold Leasing

Let’s look at the positive aspects of gold leasing that will highly benefit you-

(E.1) Enhanced Returns: Gold’s Golden Opportunity

Imagine boosting your investment returns beyond the ordinary. Gold leasing does just that, offering a potential 4-5% daily interest on top of the typical 10-11% annual return from physical gold. Platforms like Spare8 sweeten the deal, providing an extra 5% in gold on the leased quantity. 

The result? A dazzling 16% investment vehicle that can significantly elevate your portfolio’s performance, fast-tracking wealth accumulation.

(E.2) Generate Income: Earning while holding

Don’t let your gold sit idly. With gold leasing, you can generate income from your holdings while still owning the asset. Ideal for those with substantial gold amounts that aren’t actively earning, leasing allows you to earn interest without selling your precious metal. As gold generally appreciates over time, you’re in for both lease payments and capital appreciation, a win-win situation.

(E.3) Diversification: Beyond Stocks and Bonds

Escape the traditional mould. Gold leasing lets you diversify your investment portfolio beyond stocks and bonds, offering a shield during market downturns. Seize the opportunity during economic or political uncertainties when gold demand surges. It’s a strategic move to safeguard your investments against potential risks.

(E.4) Lower Upfront Cost: A Gold Entry with Less Capital

If you’ve been eyeing gold but hesitating due to high upfront costs, leasing is your answer. Since you’re not buying gold outright, the initial cost is significantly lower. This makes gold leasing an appealing choice, especially for investors wanting to dip their toes into gold investments without a hefty upfront commitment.

(E.5) Stability: The Haven in Gold

Gold’s reputation as a safe-haven asset is well-known. With gold leasing, you can capitalize on this stability, effectively hedging against inflation and economic uncertainties. Integrate gold leasing into your investment mix for a balanced blend of conservative and growth-oriented assets, minimizing overall risk exposure.

(E.6) Compounded Interest and Value Appreciation: Gold’s Growing Power

Enter the realm of compounded returns. Gold leasing offers not only monthly returns but also a steady appreciation in the value of your gold holdings over time. This compounding effect transforms gold leasing into a potent long-term wealth creation tool, ensuring your wealth grows steadily.

(E.7) Flexible Investment Opportunities

Gold leasing breaks barriers with its flexibility. Start with small investments, sometimes as low as ₹10 per day, and convert them into a lease. This accessibility makes gold leasing a viable option for a diverse range of investors, regardless of their initial capital.

(F) Risks & Disadvantages of Gold Leasing: What you must be aware of?

Risk of Gold Leasing

Here comes the crucial part of this write-up. You must be wondering- Is gold leasing safe? Well, it’s not! Why? Due to the following reasons-

(F.1) Risk Exposure: Choose Wisely

You must begin your gold leasing journey with caution. While the prospect of enhanced returns is alluring, there’s a crucial factor to consider—risk exposure. The main concern here is the potential default by the lessee, typically the jeweller. 

If the jeweller fails to meet their obligations of repaying the leased gold or the agreed-upon interest, investors could face losses or delays. To counter this, meticulous selection of reliable and creditworthy lessees is imperative to minimize the risk.

(F.2) Market Volatility: Riding the Waves

The gold market dances to its own tune, influenced by global economic changes, geopolitical events, and investor sentiments. Brace yourself for the ride—market volatility is part and parcel of any investment linked to financial markets. The value of gold can fluctuate, impacting overall returns from a gold lease. Investors need to be prepared for these inherent fluctuations and navigate the waves of the gold market.

(F.3) Unregulated Territory: The Risk of Absence

One significant concern shadows gold leasing—it operates in an unregulated space. This absence of regulatory oversight leaves investors without a safety net in case of losses. Add to this the potential risk of jeweller default, and the plot thickens. 

Although platforms claim to secure bank guarantees from jewellers, ensuring a safety net if defaults occur, it’s crucial to note that these guarantees cover 100-110% of the total gold quantity leased. 

While reassuring, caution is advised. In the event of a jeweller default amidst surging gold prices, the recovery of your gold may be confined to the amount covered by the bank guarantee.

(F.4) Liquidity Considerations: Balancing Returns and Accessibility

Leasing gold offers regular returns, but liquidity might not always match that of stocks or bonds. Investors must weigh the potential lack of immediate liquidity against their financial needs and emergency requirements. 

Thus, you must embark on the gold leasing journey with eyes wide open, acknowledging the risks and crafting a strategy to navigate them. It’s not just an investment; it’s a calculated adventure towards enhanced returns and financial growth.

(G) Gold Leasing vs Gold Lending

Let’s briefly look at the difference between Gold Leasing vs Gold Lending-

(G.1) Gold Leasing: Partnering with Jewelers

Embark on the gold journey with clarity—understand the distinction between gold leasing and gold lending. Gold leasing is like sharing your gold with jewelers or businesses in need of the precious metal for their day-to-day operations. What’s crucial? You remain the proud owner of your gold throughout the lease, all while earning interest on the leased gold.

(G.2) Gold Lending: Temporarily Parting Ways

Now, let’s explore gold lending. It’s like loaning your gold to a party, often a financial institution, in exchange for an agreed-upon interest rate. Here’s the twist: during the lending period, you temporarily hand over ownership of your gold. But fear not, as upon maturity, your borrowed gold makes its way back to you, bringing along the interest it earned during its little adventure.

So yes, it is a tale of two gold opportunities—leasing for those who want to keep a close eye on their precious metal and lending for those who don’t mind a temporary separation, as long as their gold comes back with a little extra shine. Choose your gold adventure wisely!

(H) Gold Leasing vs Sovereign Gold Bonds: Unravelling the Differences

In this section, we will look into the detailed breakdown of Gold leasing vs Sovereign Gold Bonds.

ParameterGold LeasingSovereign Gold Bonds (SGB)
ReturnsAdditional 4-5% interest on top of gold price appreciationAdditional 2.5% (p.a in INR) returns on top of Gold appreciation
Extra Returns TypeIn gold gramsIn Indian Rupee (INR)
Interest TypeCompound Interest (Compound leads to higher returns YoY)Simple Interest (Fixed Returns every year)
Lock-in PeriodNo lock-in. Can withdraw anytime as cash or get Gold deliveredLock-in period of 8 years. Can sell before maturity at a discounted rate of 7-8%
Taxation20% LTCG with indexation benefitsNone if held till maturity & if purchased in the primary market.
WithdrawalsAllows selling at a 2-3% discount, maintaining flexibility.Requires selling at a 6-8% discount in the secondary market for early withdrawals.
Gold Leasing vs Sovereign Gold Bonds

(H.1) Calculation Comparison

YearGold Price/10gm (Rs.)Gold Leasing @5% (Rs)SGB @2.5% (Rs)
057,780  10gms = 5,77,80010gms – 5,77,800
164,136(10gms + 0.5 gms extra gold) = 6,73,425(10gms + 2.5% of 5,77,800) = 6,55,803
271,191(10.5gms + 0.53 gms extra gold) = 7,84,878(10gms + 2*2.5% of 5,77,800) = 7,40,800
597,363(11.03gms + 1.73 gms extra gold) = 12,42,622(10gms + 5*2.5% of 5,77,800) = 10,45,855 
81,33,156(12.76gms + 2.01 gms extra gold) = 19,67,323(10gms + 8*2.5% of 5,77,800) = 14,47,120
Calculation Comparison: Gold Leasing vs SGB

Understanding the nuances between SGB and Gold Leasing empowers you to make informed investment decisions aligned with your financial goals.

(I) Guidelines on Gold Leasing Potential

Let’s look at the guidelines with which you can maximise the profits on gold leasing-

(I.1) Market Insight: Timing is Everything

The first thing to do in your gold leasing journey is to assess the  current market price and future projections. Leasing gold below its potential market value may mean missing out on profits. Stay informed about gold’s trajectory to make strategic decisions for a lucrative investment.

(I.2) Define Your Goals

How much gold should you lease? Tailor your decision based on investment goals and available funds. Whether you’re a seasoned investor or just starting, align your leasing quantity with your financial aspirations.

(I.3) Smart Shopping: Compare and Contrast

Not all gold leases are created equal. Explore the market, compare deals, and choose wisely. Prices can vary significantly, so take the time to shop around. A little effort upfront can lead to substantial returns.

(I.4) Embrace the Risk: Know what you’re getting into

Gold’s allure comes with its share of volatility. Acknowledge the risks before diving in. While potential gains exist, losses are also possible. Understand and accept the unpredictability of gold prices to navigate your leasing journey with confidence.

Investing in gold leasing offers a promising avenue, but success lies in informed decisions. Maximize your investment potential by staying attuned to market dynamics, setting clear goals, making smart choices, and embracing the inherent risks. It’s not just leasing gold; it’s sculpting a path towards financial prosperity.

Note: Do you know the significance of the “National Pension System” in India? If not, then visit the article “How NPS helps you in retirement?” for detailed information.

(J) Final Thoughts on Gold Leasing

Considering the upward trajectory of gold prices predicted to reach ₹62,000 in 2023, investing in gold and exploring leasing options emerges as a compelling move. The prospect of an additional 5% returns atop the 11% gold appreciation positions it as a formidable asset class, outshining many mutual funds with a substantial 16% returns potential. 

This presents a golden opportunity to diversify your portfolio and tap into the lucrative world of gold leasing.

However, with innovation comes responsibility. Ensure that you tread cautiously by dealing exclusively with registered platforms. While gold leasing unfolds as a novel investment avenue, your financial security rests on choosing a reliable partner. 

Now, as the gold market gleams with potential, seize the moment to uncover the benefits of both traditional gold investments and the innovative path of gold leasing. It’s not just gold; it’s a journey toward financial growth and a glittering future.

Related Posts:

Photo of author
Published By: Supti Nandi
Notify of
1 Comment
Newest Most Voted
Inline Feedbacks
View all comments
Rohit Yadav
Rohit Yadav
1 month ago

Agree, gold leasing is a great one to invest however it comes with great responsibility 😁