Indians go gaga over gold ornaments. As per research, over 16,000 tons of gold is stored in Indian households in the form of jewelry.
The estimated value of that gold is 27.2 lakh crores. It is twice the reserves of foreign exchange held by the Reserve Bank of India.
Gold rate today in India is very high. Here are the points that you must factor in when it comes to investing in gold.
1. Various Forms of Purchasing Gold
Gold comes in various shapes and sizes.
As an investor, you ought to know about these forms of buying gold. Jewelry is the most traditional form of purchasing gold in India. From an investment point of view, this isn’t a good idea. It comes with losses in the disguised in the form of making charges and wastage. It constitutes of 10-35 percent of the total jewelry cost.
Bank coins aren’t a great investment idea either. Banks charge a 5-10 percent premium for coins. Also, the bank coins offer lesser liquidity.
Bullion bars are a good mode of investment but it comes with a high amount of money as a minimum investment.
Gold Exchange Traded Funds (ETFs) is a trending option. It is alike mutual fund but it invests particularly in gold. It is a safer and easier option to buy gold. The charge is very less and the gold is accessed via electronic means. The only disadvantage is that you never get to see your gold.
2. Current Income
In any form, gold doesn’t offer any source of income. The sole exception is the dividend option that comes with the gold ETFs. When held in a physical form, the only outflow of money for the lockers maintenance is there.
3. Capital Appreciation
Gold has been the ideal shield against inflation since ages. When it comes to returning on investment, it has performed terribly poor at 0.8 percent above the inflation. Shares and real estate beats gold on the grounds of capital appreciation by giving the returns of 11 percent above the inflation
4. Risk
In India, gold doesn’t come with much of a risk. When the figures were depicting negative inflation i.e. deflation during the previous year, actual prices of gold were increasing.
5. Liquidity
Gold comes with the highest liquidity as compared to the different investment options. Any day, any time gold can be converted to money. Banks give you a jewelry loan. Gold jewelers would give you money in exchange for your gold jewelry after subtracting the making charges and wastage charges.
6. Tax Treatment
Gold is the victim of capital gains tax according to the Income Tax Act. It is recommended to ask your jeweler shop for the receipt. Gold doesn’t offer any other tax advantage.
7. Convenience
In terms of convenience, gold scores super high. With the price rise, the smallest investment becomes higher. ETFs, offer the convenience to hold gold for a short period of time. We hope this article has shed some light on terms of gold as an investment option.
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