Over the ages, gold has represented riches and financial security. Is the one metal that is always seen as valuable and which seems never to depreciate. Buying gold has been seen as a sound investment for ages something that will always grow in value over time. However, recently, the price of gold has fallen significantly. So, is this the right time to buy gold? We Indians have always had an emotional connect with gold, but how is gold as an investment option? And given that there are other avenues for growing wealth such as equity and mutual funds, is gold still a good option?
Recently gold prices experienced a significant fall; falling about 20% from the all-time highs. In August of last year, gold had reached previously uncharted heights of Rs.56,200 and prices are now down by about Rs. 11,500. This reflects international prices and also reflects the strengthening of the US dollar as well. According to reports, global markets saw gold prices drop to $1,700 per ounce, which is the lowest level in nine months.
Gold prices are unlikely to appreciate very much in the near future. Experts are of the view that gold prices may drop further in times to come, though they may not fall too much further. Hence it seems gold will not fetch returns in the short term. Some investment advisers feel that how could be a good time to buy only for those investors who plan to hold on to their investment for a significant length of time.
However, the other view is that gold is a good option for those looking to diversify their portfolio. Gold’s permanency, versatility and timeless value always make this a great investment option; one that will always pay in the long run.
Of course, the best-known way to invest in gold is to buy gold in physical form. This can be in the form of ornaments that can be worn, however designing and making charges are also involved here, which are not recoverable. So, this makes less sense from the pure investment point of view. Gold can also be bought in the form of coins, bricks or ingots which can later be transformed into jewellery or can be sold depending upon the requirement. However, there is always the issue of storage and safeguarding of gold in physical form; insurance requirements and so on. Theft or loss is always a possibility.
Hence, investing in gold bullion via the stock market or investing in gold mining companies may be a safer way to invest in gold. Gold investment can also be in the form of ETFs or gold-based exchange-traded funds. Here, each unit purchased represents a fixed amount of gold and carries value based on the price of gold in the market at a given time. Experts advise that this type of gold investment is more suitable for smaller investors. This is because the price of a single ETF is comparatively low and hence more flexible.
While investing in ‘digital’ gold, be sure to do so only from authorised entities with tie-ups with banks and other financial entities. Ensure gold purity and requisite hallmarking and clarify refund policies. Check gold prices in real time when buying – here as well, the stock market formula of buy-low-sell-high – will apply. When investing in gold, keep in mind the fact that gold carries 3% GST whether it is bought in digital form or physical form.
Whichever way you decide to invest in gold, you can be reasonably sure that your money is safe. In other words, gold is never a bad investment.
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