Invest in Gold Fund

there r 2 types of gold funds working in india now.

1. Gold ETFs - These r exchange traded funds where the underlying asset is 24 carat pure gold in physical form. these funds 'll try to mimic the returns as generated by physical gold. Benchmark, UTI, Reliance, Kotak, Quantum to name a few who r offering these funds.

2. Gold Eq. funds - These r funds where underlying asset is shares of gold mining cos. listed worldwide. these funds 'll give the returns as generated by underlying shares of mining cos. DSP Gold fund & AIG gold fund r example. Normally these indian funds 'll invest in parent funds of their respective owner (DSP & AIG in this case) where the underlying asset is shares of these mining cos.

On taxation front both these funds 'll be treated as debt funds & taxed accordingly.

Regarding GETFs, as i already told it 'll mimic the return (net of charges & expenses) of physical gold.

Regarding Gold Eq. funds, although not assure, u may expect anywhere from 12 to 30% subject to performance of underlying mining cos.

Regarding The two Gold Mutual Funds that are available now for investment, i.e, DSPML World Gold Fund and AIG World Gold Fund, please that these companies invest in stocks of Gold Mining Co., and thus have a high Alpha with regard to Gold price movement. They tend to have higher volatility compared to Actual movement of Gold price.
The advantage is, they are in existence for more than 10 years and have a good track record and there is no reason to believe they will not continue to give good returns in future also.
Among the two, DSP/AIG, let me clarify, DSPML holds more stock of South African Mines and AIG holds more stock of Canadian Mines. As you already may be knowing, South African Mines have reached peak of the production capacities and struggling to maintain costs and thus Profit Margins which is not the case of Canadian Mines.
DSPML World Gold Fund will have a good performance for next 6 months to 1 year, Later on, its performance depends on its ability to take correct calls on its holding in South African Mines. AIG World Gold Fund will not have any such tough decisions to make.

So, if your investment horizon is 10 years, you can safely go for AIG World Gold Fund.

If you have a amount in mind for investing in gold, then my suggestion is Invest 75% of your investment amount for Gold in Gold Funds and balance 25% in Gold ETFs.
Best of luck,
Regards,
Srikanth