Gold Investment – Types of Instrument, How to Choose, Right Time to Invest & more

Here you will know everything about Gold Investment in India.

In India, people connect to gold religiously. This precious metal is of cultural significance as well as holds a sacred value in diversified religions for centuries.

The inflation-beating capacity of gold is strong at its selling points, making it worthwhile to invest in gold.

Ultimately, the return will be in line with the rate of inflation. Its inverse relation with equity investments also acts as an advantage towards investors.

This indicates that if the equity market falls, gold performs well. So it adds up to the portfolio efficiently. Therefore, over the years, the infatuation of gold continues to become stronger.


Types of Gold Investment

The demand for gold persists in local traditional markets as well as in international stock exchange. Buyers, investors, or traders can choose to buy gold according to their convenience in the following ways:

Physical Gold

Gold is available in physical form, which typically includes jewelry, gold coins, and bars. People also invest in gold saving schemes that are available in two ways:

Fixed Deposit

It is the most demanding type of investment. It allows people to deposit a fixed amount every month for the chosen tenure.

After the term ends, they can buy gold from the same jeweler from this deposit. This procedure takes place while considering the active price of gold in maturity.

Jewelry

Ultimately, the possession of gold jewelry in mass amounts by Indians is an investment for the future. But, it creates a risk of safety, cost, and outdated design.

Gold Coin Scheme

Entities like jewelers, banks, non-banking finance companies, and e-commerce websites invest in gold coins. These coins have an embed design of Ashok Chakra on one side and Mahatma Gandhi on the other.

Gold InvestmentThese are light-weighted in comparison to bars in such a way that coins are available in denominations. It is available in 5 to 10 grams while bars are available for 20 grams.

These are available in 24 karat purity and 999 fineness bringing advanced anti-scam features and tamper-proof packaging. Investors have to ensure that these coins and bars have a hallmark as per BIS standards.

The distributing authorities for these coins and bars are MMTC outlets, banks, and post offices. Investors also have a provision to return these coins at specific MMTC outlets.

They buy back the same in the prevailing price. It is if the gold is intact tamper proof package with original invoice.

Gold Exchange Traded Fund or ETF

It is a cost-effective technique, mostly used by big investors. This type of investment takes place through gold exchange-traded funds (Gold ETF).

Typically, exchange bodies regulate these trades. In India, the exchange bodies are the National Stock Exchange and Bombay Stock Exchange.

They manage the trading of this asset along with others. It provides transparency in pricing, and its distribution in the local market is close to the price during trade.

For investing in the Gold ETF, individuals or agencies need to create a Demat account with a stockbroker.

The broker is in charge of conducting activities on behalf of the owner. For example, owners can buy lump sum gold at once or continue buying at regular intervals.

It happens through systematic investment plans (SIP). There is no such restriction to buy a certain amount of gold. Investors can begin by buying 1 gram also.

Even if there is no entry or exit charge for ETF investment, the investors have to spend three different costs.

These include the expense ratio for managing the fund. The broker cost for every transaction with gold units, and impact returns that track errors.

Sovereign Gold Bonds

These are issued by the government for selling fresh stock of gold to investors in every 2-3 months. The window remains open for a week, and the buyers buy accordingly.

Digital Gold

An online mobile wallet platform of Paytm and GoldRush allows transactions of any.

That is, the digital gold including, gold coins, bars, and jewelry, online. The Stock Handling Corporation of India allows an online investment in gold by its website.

It is while Motilal Oswal provides digital gold online investment by Me-Gold. Again, these schemes of investment regulated under MMTC offers an association with MMTC-PAMP.


Know in Detail about Various Types of Gold Investment here

Digital Gold InvestmentGold Coins Investment
Gold Bars InvestmentGold ETF Investment
Gold Jewelry InvestmentGold Funds Investment
Gold Monetization Scheme InvestmentSovereign Gold Bond Investment

Choosing the Correct Type of Gold Investment

Among the mentioned types of investment for gold, some related points must be noted by individuals before making a decision.

Having clarity on the functioning of each type of investment automatically awares the investor of the possibility of risks and benefits. These include:

  • The cost of physical gold, that is, coins and bars, is ten percent and also higher for jewelry.
  • Paper Gold, on the other hand, are cost-effective, but the costing for gold ETF can be around one percent.
  • Individuals and agencies looking for long-term investment in gold can prefer SGB that provides maturity after eight years.
  • Gold ETF provides better liquidity than SGB along with other benefits. These benefits are that the online platform provides easy access to buy gold units.
  • Another big difference is the taxation front. Here, the gains in Gold ETF are subject to twenty percent tax after three years post indexation.
  • The disadvantages related to gold ETF are that its units don’t earn the additional interest of 2.5 percent per annum like the SGBs provide.
  • If the investor has a clear idea of the purpose of investment, they should not have more than 10 percent of the total portfolio in gold.

What Gold Investment is good?

Gold is an asset of investment. But, investors should keep in mind the safety, liquidity, and profitable returns from gold.

Gold returns are volatile but act as a haven in terms of crises. Therefore, if all criteria meet, investment is good to go.

Apart from all this, there are certain documents that the investors should hold for buying gold. If the investment is more than two lakhs rupees in the physical gold, the investor must have a PAN card.

In ETFs, a simple Demat account suffices the necessity, whereas, in SGBs investment, KYC is mandatory, including documents like Aadhar, PAN, Voter ID, or Passport.


Right Time to Invest in Gold

In India, Gold is not only about Jewelries but it is also about securing a financial support system. People understand its importance so they invest in it either in the physical form or in the paper form.

The physical form includes purchasing the gold in the form of either coins, gold bars, or jewelry whereas the paper form includes purchasing the gold in the form of sovereign gold binds or gold exchange-traded funds.

In addition to this, there are Gold Mutual Funds in which the investments are made in the shares of the international gold mining companies.

Before understanding the right time to invest in gold, it is important to understand the different ways of investing in gold. One of the ways is physical gold that is jewelry. The money spent on making gold jewelry is irrecoverable.

According to the historical data, the best time to invest in gold is the beginning of January and early April. In addition to this, the mid-June to early July is also the best time to invest in gold.

The data also shows that the price of the Gold drops more in the month of March. It is as compared to other months which make it the best month to invest in gold.

The data of Gold Investment according to the quarter shows that the price of gold drops the most in the second quarter.

This makes it a desirable quarter for the investors to purchase gold at a lower rate and sell in other quarters such as third to get maximum return on their investment.


Find more details about Gold Investment here

History of GoldGold vs Other Asset Classes
Gold Rate TodayFeatures of Gold
Gold Investment CalculatorGold Rate Forecast
Gold Investment ComparisonGold Rate Calculator
Gold Rate Comparison

Impact of Gold Investment at a Right Time

At the time of investing in Gold, it is important to ensure that the cost price should be less compared to the price at which it would be sold. This can be done by keeping track of data to identify the time and invest accordingly.

Investing in the right time as well as investing in the wrong time, both have a significant impact on the investor.

The historical data is very useful in such cases to identify patterns. We can use it to make decisions regarding investing in gold.

According to the historical data, the price of gold rises more in the month of February, August, September, October, and December.

These months are not the right time to invest in gold. The price of gold is higher in these months compared to other months of the year.

From the historical data, it can also be seen that the price of gold drops in the month of March, April, November, July, May, and June.

These months are the right time to invest in gold. The price of the gold is lower in these months compared to other months of the year.

When the historical data are presented in the form of quarters, it can be seen that the price of Gold is the highest in the third quarter.

That is July through September which means the investor should avoid purchasing in these months.

From the data, it can be seen that the gold performs worst in the second quarter that is April through June.

It means that the investors can invest in gold at a much lower rate. They sell the stock in other quarters at a higher rate and earn profits.


Decision to make before Investing in Gold

Using different options of investment, investors get to choose between broad options.

That includes factors like paperwork, security, SIP availability, additional charges, effects of prices, need for Demat account, returns, investment cost, so on. Depending on their convenience, they can make the right choice.

By assuming the continuous all-time demand for gold, there is always a good time to invest in it because it acts as a valuable asset.

Also, by considering the need-based culture of demand, the investment-based criteria somehow remain unbothered.

But, those who are a part of the investment-based category can refer to the factors mentioned above that are suitable for investment.

As of the current scenario of gold in the market, the observation states that gold has given double-digit returns with uncertainty. Therefore, it must be a part of an investor’s portfolio.

Even if there can be an increase in the risk appetite of gold, other factors like slower global growth, weakening of the dollar, geopolitical tension, and global reflation are a strength that motivates investment in gold.

By looking at the status of gold in India, year to date, the prices are up 28%. It indicates that inflation can continue, and investors can buy gold with no worries because the benefits of investment outrun the disadvantages.


Conclusion – Gold Investment in India

There are many different metals, but compared to other metals, only gold is regarded highly as an investment and this trend can be seen in India. There are certain factors that make gold a better investment option.

Some of these factors are inflation-bearing capacity and high liquidity. For the investors, investment in Gold Exchange Traded Funds saves the hassle of purchasing the real gold and storing it. Instead, in the form of Demat, the gold is bought and stored.

On the other hand, there are Sovereign Gold Bonds in which the digital gold is bought. Since they are issued by the Reserve Bank of India, they are one of the safest ways to invest in gold.

At the time of investing in gold, the investor not only has to consider the right time, but they also have to consider the right way to invest in gold.

Considering both the factors will make investing in Gold profitable for the investor.


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