Different Ways and Guidelines for Investment in Gold


Many people are looking to invest their money on a field which gives a safe return. Gold is considered to be the most safest portfolio for investing and it acts as a hedge for inflation. This resource direct some ways of ways of investment in gold and some guiding tips for the investing people, who are looking to made their investments on Gold.

People of India go crazy for Gold. India and China are considered to be the biggest consumer of Gold. Considering about India, the house-hold Gold measures about 16,000 tons, whose value is about Rs.30 lakh crores of Indian currency. As per the current status, the rate of Gold hiking at a speed of light. In the past few days, its rate crossed over 800$ per ounce(28.35gm) of Gold. It is better to invest in Gold because it has high liquidity as well as tangible. Here are some of the ways and guidelines for Gold investors.

Jewellery :


It is most dominant form of buying Gold in India, it has the advantage of holding physical gold and can be used for fashion as well as for showing prestige. However, the disadvantage of theft cannot be ignored. There is also chances for loss in value due to making charges, impurity and exchange charges if you need to sell them. These losses can vary from 15% to 35%. Therefore it is not preferable to invest in Jewellery.

Gold bullion bars:


This is the old method of holding wealth in form of Gold Bullion Bars. These bars are available in the denominations of 10gms, 20gms, etc. and can be bought from authorized jewelers or banks. Gold bars have the highest form of purity in comparison with jewels and coins and so it has a high market value. Despite these advantages, the disadvantage is theft. You must safe guard with safe deposit vaults and insurance, which costs money. If you having a bar of 1Kg, you cannot able to sell a part of it, so it is not highly preferable for investment.

Gold coins:


Gold coins are easy store and they are also having slightly higher price than actual Gold rate. In India, these are available in denominations of 1gm, 5gms, 10gms, etc. These are readily available in Banks, jewelery, post offices, stores, etc. Buying at Bank is quite expensive as the premium charge is from 5 to 10 percent and also it has low liquidity value as they are not bought back by the banks. World Gold Coin(WGC) issue coins through jewelers and they have lesser premium over market price, which is about 1 to 2 percent but are redeemed at market price. Hence, it is also not recommendable to invest.

Gold certificate / Deposit scheme:


These are certificates given by a financial institution representing the ownership of Gold. This is one of the safe methods of gold investment. In India, this method is started in the year1999 and being controlled by SBI. This scheme allows the individual to deposit their Gold in bank for a pre-determined period varying from 3 to 7 years and receiving Gold certificate or Pass book from bank as a proof for deposit. The Bank will pay an interest of 3-4 percent per annum depending upon the duration. However, the individual has to pay for safe storage and insurance. This has lower loss of value but gives lower return.

Gold Exchange Traded Fund(GEFT):


ETF is the hotline of investment at present. It is easier to buy in a very safer mode. The charges are very less comparatively and gold can be accessed electronically. There is no safety problem like safe storage of gold. The holdings of Gold are in units (1 unit= 1gm) and are kept in stock exchange. This is a mutual fund, which involves buying shares at market price and also considered to be the most safest way of investment in gold. The price of one unit depends on international prices and currency rates. Gold EFT can be bought and sold simply by a click of mouse. Moreover, Gold in the form of papers does not hold wealth tax. There is also an opinion for converting paper gold into physical gold. The disadvantage is one cannot see one's gold holdings but it is the safest and best preferable method to invest gold. This requires Demat account with a registered broker for investment in gold ETF. There is charges for demat and brokerage but for investors it is cost effective.

Gold mutual funds:


It involves the investment on mining and refining companies. The pricing is based on the value of portfolio of investments in gold exploration companies. Here one can invest fund without a demat or trading account and is easy and convenient method of investment. A relatively safe method of buying and owning gold stocks allows the owner to diversify among many stocks and allows the investing decisions to be made by a professional. However, it is not investment on Gold it is actually investment on gold companies.

Advantages:


1.The price of dollar getting weaker day by day and seems to have no end.
2. In last four years the hike in gold price is above Rs.20,000
3. Central bank in several countries state that they intend to hold gold instead of selling it, this will further helps in increasing gold cost.
4. The need of gold is higher than its production, thus it will lead to rise in price obviously.
5. Most gold consumption is done in India and China and their demand is increasing with their increase in national wealth.
6. In past two decades investment in gold resulted with an average return of 7% and proved to be a dependable hedge against inflation.
7. Gold has the high liquidity to sell.
8. Statistics reveals that when inflation hikes by 10%, the gold rate jumps up to 30%.
9. Gold only beat inflation.
10. If we look in to past inflation records of 15-20 years, it is seen that gold is a good hedge towards inflation.

Disadvantages:


1. Gold would not pay any income or interest to the holder.
2. Central banks have tons of bullion which they occasionally threaten to sell.
3. Gold suffers Capital Gain tax as per IT act.
4. Gold in physical form is always subjected to be safety steps.

When you compare with other investment, Gold is the better way to invest your money which gives you surety of return as well as it has the high liquidity to sell. Among the investment method, Gold Exchange Traded Fund (Gold EFT) is the safest and better way of investment as it does not need safety measures to safe guard your gold as well as the brokerage and demat charge is less expensive. It is better to invest in gold as a hedge for inflation.


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