Traditionally, gold has been viewed as an asset that is immune to the effects of inflation and also was considered as a safe asset in the times of economic recession. Culturally, it is viewed as an insurance policy during bad times. Unlike other assets, paper currency or coins, gold has been known to maintain its worth through decades and hence people see gold as one option to pass on and preserve wealth from one generation to the next.
If you are one of them who are looking to invest in gold in India, you might come across a plethora of options. But before that, let’s have a look at the points you need to consider before investing in gold, the reasons why you need to invest, the tax liability, and everything else you would want to understand.
If you plan to invest in gold ETF’s, you need to open an account with a brokerage firm along with a demat account. When it comes to buying physical gold, it’s a simple process where you need to walk into the jeweler’s store and buy gold. Here’s a quick tip, if you are purchasing gold from an investment point of view, buy gold coins and not jewelry.
This is because jewelry could cost you its making charges which you would not be able to recover when you sell. The best option for you would be to buy gold ETFs, since there’s no threat of theft involved and they can easily be sold.
Why invest in gold?
The most commonly asked question is, why invest in gold? Let us assume that you invest all your money into shares, thinking of gold as a dead investment. Even if you think of it as a dead investment, it is always advisable to have 10% of your investments in gold as a part of your portfolio.
For the beginners investing in gold must understand the factors that impact gold prices in India. Amongst many are these international gold prices. These largely depend on US Fed interest rates, geographic-political situations, and the demand supply scenario in the international market. Indian gold prices are derived from international prices since they have the capacity to influence rates. Moreover, what impacts gold prices is the movement of rupee against the dollar. When the rupee gains as against the dollar, gold prices in India drop and become cheaper. In contrast to this, when the rupee weakens against dollar, the gold prices increase in India.
Is it safe to invest in gold?
Like so many other things in life, the simplest questions have the most complex answers. In this case too, the answer is complex. To invest in gold is definitely risky, however, since gold is viewed as a store of wealth in bad times and uncertainties, you shouldn’t be dismissing it completely as an option. It just needs to be paired with a diversified portfolio in order to have yourself benefited.
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