Last Updated on October 12, 2022 by Olivia Anderson
Before Diwali (Dhanteras), we Indians buy gold to bring good fortune and wealth. Hence, we have hired the best investors in the nation to assist you in deciding how to invest in gold this year.
As a rule, we are reminded by our elders not to resell gold jewelry due to its emotional attachment. Especially in light of how important gold remains for Indian religious and celebratory festivals. Hence, let us find out the best way to invest in gold as a trader.
How do you profit from gold investments?
ICRA, a rating agency, has forecasted that India’s demand for gold jewelry would increase by a healthy 11% during the course of the holiday season this year.
In this year’s festival season, gold merchants had a relatively positive and happy experience due to early notification of the vaccination campaign and low transmission rates.
Additionally, the Reserve Bank of India (RBI) anticipates a successful festival season for merchants with rising consumer demand in both urban and rural parts of India. Is the conventional strategy of purchasing gold jewelry the best method to enjoy these advantages? No.
According to a World Gold Council study, chain gold jewelry stores will have a 35% market share by 2021 due to shifting consumer preferences and governmental laws that have forced the industry to become more structured. This trend has been going on for the previous 10 to 15 years.
But don’t you think that only the merchants benefit from this and that this is not the best way for an investor to trade in gold and get wealthy? And should we purchase gold at this time? Let’s find out the answers to all of these questions.
Should you currently invest in gold?
When gold prices fall below historical highs, the rationale for investing in the yellow metal becomes more compelling, as does the public’s perspective. Given how unstable gold’s price is right now, investing in it for the long term is strongly recommended.
Regardless of the gold rate prediction for the day, it is to your best advantage to try to play the market by obtaining gold in smaller amounts (such as ingots, bars, coins, or digital gold). It is true even if gold prices fluctuate more than expected, either up or down. Because doing so boosts your chances of benefitting the most.
After taking advantage of this chance to buy gold, one shouldn’t worry about the diversity of their investment portfolio since yellow metal safeguards the stability of their assets. The experts recommend adding gold to 10% to 15% of a portfolio’s value.
Which is better physical gold or digital gold?
Digital gold sometimes referred to as a virtual representation of buying and investing in the precious metal, may be purchased online for as low as one rupee. It has lately seen a spike in popularity, especially among younger investors, since there are no storage costs.
Whenever customers purchase digital gold, their rupees are backed by an equivalent amount of physical gold held in bank-quality vaults, insured, and protected by the companies selling it. In addition, a trustee independent of the company examines the real gold.
Due to its constant availability for digital purchase at the retail market’s determined price, gold is a particularly liquid asset. Investors may buy or sell shares anytime, anywhere, and without hassle.
Physical gold buyers often deal with issues with the security and storage of the yellow metal and are compelled to pay high prices for locker space. This customer angst is reduced to a reasonable degree when buyers invest in digital gold.
On the other hand, customers are accountable for ensuring they are dealing with a reliable supplier of digital gold.
How should we invest in gold?
There are six primary possibilities for Indian investors who wish to include gold in their portfolio:
- Physical Gold
- Digital Gold
- Gold ETF’s
- Gold Mutual Funds
- Gold Futures Contracts
- Sovereign Gold Bonds
Having actual, physical possession of gold coins and bars is the time-honored custom of possessing gold, sometimes referred to as gold bullion.
However, with gold bullion, the purchase price is your first expense; storage and insurance are also significant fees. So, investing in physical gold is not the most excellent option.
Sovereign Gold Bonds, Gold ETFs, Gold Mutual Funds, and Digital Gold ETFs enable you to get around physical gold’s limitations. The following is a concise explanation of each of these potential investment avenues:
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Digital Gold
You can buy them via various applications; the smallest purchase unit is one gram. The increments go up from there.
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Gold ETFs
The principal underlying assets of Gold Exchange Exchanged Funds (Gold ETFs), which are traded on stock exchanges similarly to shares, are Physical Gold and Stocks of Gold Mining/Refining Companies. Having a Demat (Dematerialized) Account is required to purchase Gold ETFs.
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Gold Mutual Funds
Investing in Gold ETFs and being managed by asset management companies (AMCs) are the purposes of these mutual funds. Most Gold Mutual Funds are available for investment via the apps used/provided by the best stock broker in India.
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Sovereign Gold Bonds
The Reserve Bank of India (RBI) releases these bonds regularly, and the top banks in the public and private sectors are where you may buy them. Despite being guaranteed by the government of India (GOI) and tied to the price of gold, returns do not consider physical gold as their underlying asset.
Even though all of the aforementioned gold investments are associated with gold’s price, they differ in risk, returns, availability, liquidity, lock-in period, and taxes.
The Final Word
Every kind of investment has a unique mix of benefits and drawbacks. Given all the limitations, investing in gold should be done with the same prudence as any other potential investment. Market research should be the only factor considered when making investment decisions.
It’s essential to remember that although purchasing gold in its physical form during the festival season has significant emotional significance, investing in the more widely recognized form of gold has its advantages.
