Gold Investment - Is it Good idea?

India is always obsessed about gold. We buy on religious occasions like Akshya Trithiya, Diwali etc  wedding functions and as gifts.We also still consider it as a savior against economic bad situations.



GOLD Price chart since 1951.

1. Gold bought as Jewellery 

Gold in one of the one of most expensive kind of jewellery.  In Indian household, it is a sign of wealth. Every household has some jewellery in home. However, due to unsafe conditions, we refrain wearing gold in daily use except some minimum required as per traditions. We normally keep all our jewellery safe - guarded in lockers. These lockers also cost us Rs 3000 to Rs 10000 depending in size and banks. So, it is kind of expense. Most of the times jewellery are not sold even in case of emergencies. They are considered as last resort. However, we keep on buying jeweleries and stocking our lockers.Moreover, these jeweleries have a wasting and making charges which can vary from 10 to 40% depending on kind of designs. You never fetch good money for it even if you go for an exchange of jewellery.They also do not contribute to regular interest income as in Fixed deposits.

Thinking logically, it is not a good idea to buy as a form of jewellery.

2.  Gold bought as Bank Coins

Banks charge a premium in a range of 5-10%. for their coins. Also, bank coins are not bought by banks so they have lesser liquidity.

So, Bank buying is also not a good investment.

3. Bullion Bars

Bullion refers to precious metals in bulk form which are regularly traded on commodity markets. The value of bullion is typically determined by the value of its precious metals content, which is defined by its purity and mass.

Bullion bars are good modes for investment but the minimum investment here is much higher than a common investor can think of.

4. Gold Exchange Traded Products

Gold exchange-traded products are exchange-traded funds (ETFs), closed-end funds (CEFs) and exchange-traded notes (ETNs) that aim to track the price of gold. Gold exchange-traded products are traded on the major stock exchanges including Zurich, Mumbai, London, Paris and New York.

ETF are like mutual funds that invest in gold only. They are an easy and safer mode to buy gold. The charges are also very less and the gold can be accessed electronically.They also earn dividends.

5. Regular Income

Gold do not contribute to regular include like FD.

6. Gold Price Appreciation

If you look at the historical data, gold hedge only against inflation. 


7. Liquidity

Gold is high in liquidity. At any time of the day and any day gold can literally be converted to cash. Banks would give you a jewellery loan. Also, any friendly neighborhood pawn shop will also do the same.

Gold jewelers exchange gold possessions for other gold items. However, the value fetched is not at par considering the purity of gold at localshops until it is branded jewellery. Branded jewellery charge more on the making charges. Also, the exchanged jewellery has also making and wastage charges involved again. So, there is a dual loss on the value of money.


 6. Taxes

Gold suffers capital gains tax as per the Income T axAct. In India, most of the jewellery traded in un-billed. This can be an issue for people who treat gold as a investment, Only branded jewelers give you bill but their jewellery is expensive compared to others.It is better to ask jeweler for a bill if you're investing as investment.

We can make use of indexation benefits when calculating the capital gains of gold. So the tax payable will not be much.

Gold does not have any other tax benefits.

Conclusion
Investor are advised to have a certain percentage of investment in gold to hedge inflation and also to diversify portfolio. The idea for gold investment will be of use at times when the markets are falling and when the inflation is very high.A 5-7 per cent of the overall investment portfolio can be considered for gold investments.

Jewellery is not an investment. It is only an expense for symbolizing wealth and as an accessory.

Gold beats inflation. However, there are better options available for investing like real estate or shares or bonds.