Gold as an option for investment


In our country, Gold is considered as synonym for wealth and with the festival season is on most of us are planning to make an investment in Gold. Here I am providing you the knowledge about various methods of investment and possible benefits of investing your money in the Gold.

With the increase in inflation at an alarming rate, it has become mandatory for most of the people to think about some investment options for their safe and secured future. Of all the commodities Gold enjoys to be the most popular mean of investment. Here I will discuss about the benefits of investing in Gold and about various options available for investment in Gold.


Why we should invest in Gold?



"…gold and economic freedom are inseparable. In the absence of the gold standard,
there is no way to protect savings from confiscation through inflation. Gold stands as
the protector of property rights. If one grasps this, one has no difficulty in
understanding the statists' antagonism toward the gold standard."


Alan Greenspan, "Gold and Economic Freedom",The Objectivist, July 1966.


This is the basic question comes in our mind that why we should invest our hard earned money in Gold? Here are some reasons of your query-

Increase in inflation-


The most consistent factor which determines the price of Gold is inflation, as the inflation rises price of gold also increases. So it can be considered as the best tool for getting the value of your money with increasing inflation.

Safe option for investment-


Go3d enjoys the status of "crisis commodity" as it is the only option left for investment during an economic crisis. If an economic crisis occurs it can sink the banks resulting in the loss of investment made in the bank but gold always remains a safe haven.

Demand is more than the supply-


Gold production is declining day by day as for opening a new mine requires an average of 7 years which doesn't meet the increasing demand. In South Africa production of Gold is at it's lowest since 1931 which is the largest supplier of Gold to the world.
As India is the largest consumer of the Gold in the world so it is always beneficial to make some investment in this commodity.

Decreasing interest rates in investment in Banks-


As the Banks are decreasing their interests in its investment so people are getting more attracted towards making their investment in the Gold.

Gold as a portfolio diversifier-


To protect your wealth created in stock and financial market it is mandatory to invest in the commodities which are negatively correlated with those markets.
Gold is among the most negatively correlated assets to stocks so it is advisable to invest in it for those who have their money in stock markets.


How to invest in Gold?



After knowing about the benefits of the investment in Gold next question comes in the mind of a common man is that how to invest? Here is the answer of your question.
There are many ways to invest in the Gold but in my view best option is to invest in Gold coins. You can have the gold through following ways-

Gold Coins-

This is the most popular and common way of having Gold. Nowadays most of the banks including SBI sell their Gold coin so there is very little chance of fraud.
Gold coins are available in different sizes; you can buy one according to your need. It comes in 2, 4, 5, 8, 10, 10, and 50 grams sizes.
If you are planning to buy gold coins worth more than Rs. 50000 then you need a PAN card.

Gold accounts-


This is also an important method of investment in the Gold.
Gold Bullion banks offer two types of gold accounts- Allocated and Unallocated:
  • Allocated gold account-

  • This type of account is similar to keep gold in safety deposit box and is the safest way of investment in gold.
  • Unallocated gold account-

  • These type of account holders don't have specific bars allocated to them.

    It is a general rule that bullion banks do not deal in the gold having weight less than 1000 ounces.
    The list of bullion banks in India includes-
    1. ICICI Bank
    2. Bank of India
    3. HDFC Bank
    4. Indian overseas Bank
    5. Punjab National Bank
    6. Kotak Mahindra Bank
    7. Corporation Bank
    8. Union Bank of India
    9. Indian Bank

    Gold Exchange Traded Fund (ETF)-


    ETF is similar to a mutual fund that itself trades in an exchange.
    The main difference of ETF from mutual funds is that mutual funds invest in stocks or other assets but they themselves do not trade in any stock exchange but in case of ETF they themselves are also traded on the exchange.
    Main reason for buying ETFs in place of mutual fund is the fact that an investor can keep an eye on the ETF during market hours and whenever they want they can go ahead and buy it.
    ETF gold in India-
  • Kotak Gold ETF (KOTAKGOLD)

  • UTI Gold ETF (GOLDSHARE)

  • Reliance Gold ETF (RELGOLD)


  • Gold Accumulation Plans (GAPs)-


    GAPs are similar to normal saving plans which are based on the principle of keeping a fixed sum of money every month aside. The fixed sum then buys gold every trading day in that month.
    At any time or when the account is closed, investors can get their gold in the form of coins or bars and very rarely in the form of jewellery.
    Recently Indian Post in association with World Gold Council and Reliance money has launched its Gold Accumulation Plans which is a very safer and popular way to invest.

    Gold Certificates-


    Gold certificate is also a safe way of investing in Gold. It allows investors to hold Gold without acquiring it physically. Investors also have the option to sell their share anytime.
    The perth Mint sells gold certificate across many countries and which is approved by the government of Western Australia.

    Warrants-


    This is the method used by the leading investment banks. This gives the investor flexibility to buy the gold at a specific price on a specific price in the future. In this scheme investor has to pay a premium.
    In the past gold warrants were mostly applied to shares of Gold mining companies.


    Conclusion-


    Gold is the safest way of investment in the present scenario. With increase in the inflation and price of gold it is the best time to invest your hard earned money in gold. So if in this festival season you are planning an investment then I will suggest you to invest in the gold. It will pay you huge in the future.


    Comments

    Author: Venkiteswaran27 Mar 2014 Member Level: Gold   Points : 5

    The saying is 'All that glitters is not gold". But the gold always glitters as investment and non-perishable worth.

    The modern ways of investment in Gold have made it unnecessary to have the physical possession of gold and the attendant security risks for the individual investor.

    The modern derivative investment instruments like the ETF shave helped the investor to have a calm sleep without worrying of thieves.

    Gold will be always have its lure and lusture as ornament and more as investment. After losing its status as the "Gold Standard", worth and value of currency circulated in countries, gold was quick to better its status by gaining new status as dependable investment option.

    So gold will 'glow and glitter' always whatever be its position.

    Guest Author: Self-Directed IRA02 Sep 2014

    Gold investment is solid investment. Your blog is very informative. I agree with you that gold investment is the best investment because its value increases over time. Gold investment is very useful for your life after retirement, if you invest in self-directed IRA accounts.

    Author: Pravat Kumar Das02 Sep 2014 Member Level: Gold   Points : 4

    Gold is a ultimate savings option for Indian people.
    It includes some emotional attachment also.

    I suggest do not buy Gold coins ( although it is 100% pure and made of 24 karat but it is not acceptable by most of jewelers during exchange.

    You can stay invested through jewelry or ETF.
    Various mutual fund ( AMC) are having Gold ETF which is the best way to make some money as neither it has risk to get theft nor it reduce by using on daily basis.

    And yes always remember accumulate Gold on a systematic way for 10-15 year so that you can get the real benefit.

    Author: Partha K.16 Feb 2017 Member Level: Gold   Points : 4

    Just now I have gone through this old article. Frankly speaking, I am very impressed. The author has discussed every relevant issue related to investment in gold in India. In this connection, I would only like to add that like every other commodity investing, gold prices have its ups and downs. Gold (in real form or in paper form) must be purchased while it is moving downwards and sold when it moves upward.

    So far as paper/virtual form of gold is concerned, I would like to state that physical gold is unsafe if it is kept in home. However it can be kept in the bank locker by paying locker rental charges. If it is in shape of coins or biscuits the selling will fetch the full amounts. On the contrary if gold is in form of jewellery it will be converted in money after some deductions in the range of 5-10 % depending upon the purity of gold. Gold ETF is also dependent on gold prices and can give a handsome return depending upon the gold market growth. Here there are hidden charges of brokerage and service charges applicable at the time of selling gold ETF units. e-Gold is also based on the market rate of gold. The gold bonds issued by Govt of India are basically e-Gold which also carry a nominal interest of around 2.5% p.a. These bonds are locked for 7-8 years. However, investors can exit through market as these bonds are listed in the stock exchange.

    Concluding my response, I congratulate the author for this brilliant article. I recommend common investors interested in investment in any form of gold, to read this article.

    Author: Swati Sharma30 Dec 2020 Member Level: Gold   Points : 4

    This article has been written some time ago but the need for the information given in this article is the same even today because people are still attracted to invest in gold. Investors in gold are choosing paper gold, gold ETF, sovereign gold bonds, gold mutual funds and digital gold as better options. By investing in gold through these means, it is easier to buy and sell gold. You do not even have to worry about the safety of gold.
    If gold is a capital asset, then capital gains tax is levied on it. Selling gold before 3 years attracts short-term capital gains tax. Short term capital gains will be added to your total income. STCG will be levied as per the tax slab. After 3 years, selling gold will attract LTCG i.e. Long Term Capital Gain Tax. You will have to pay LTCG 20% + Surcharge. 4% cess indexation is possible with benefit. GST is applied to physical gold.

    Author: Sheo Shankar Jha28 Feb 2022 Member Level: Diamond   Points : 4

    Though we remain more interested to earn money substantially through our investments such as fixed deposits in the banks or choosing the right portfolio in the share markets, the returns on such investments are not always attractive since the rate of interest in the former case is not attractive at present. Also, in the share markets, risks are always associated with investments. However looking at this yellow metal, Gold, it can offer us huge profits with time. If we compare its price of Gold - way back to late 2008, it was hovering at Rs 10000/- per ten grams whereas, in February'22, it is quoted as Rs 48,000/- signifying a significant surge over years. This trend is not likely to reverse in the near future and hence its systemic purchase from the banks would prove to be a better option, both in terms of investment or as a gift to our near and dear ones, especially on marriage occasions.



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