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What You Need To Know About Gold Investment?

Invest in gold
Gold bars on nugget grains

Since time immemorial, gold is cherished for its radiance and the beauty it brings to the wearer. Gold was used as money and a measuring standard for monetary counterparts till recently. Invest in gold and sell it as and when the need arises, this has been a custom. This gave rise to gold investment, which is one of the oldest forms of investments. It is a very good strategy to gain high returns in the long run, with minimum buying and selling.

Options for buying gold

There are a number of ways to acquire gold depending on your investment goals. There are multiple options that suit a person under certain circumstances. These options are:

  • Buying gold bars and coins: One of the easiest ways to buy gold is through coins, bars and jewelry from your local jewelry shops. Such gold can be stored in the bank or your home. Bars and coins make up 2/3rd of the yearly investment.
  • Buying gold ETF: Storing gold as such is cumbersome. So, you have a choice of buying gold exchange traded funds. ETFs and ETCs (exchange traded commodities) make up 1/3rd of the annual investment demand. 2 types of gold are stored in the ETFs – allocated and unallocated. Allocated gold is stored as gold bars under the custody of recognized banks. Unallocated gold is a possession of the bank where investor is only a creditor.
  • Buying gold miner stocks: There are companies involved in gold mining. You can invest in their shares, whose stocks are compatible with gold prices. Investing in gold through gold mining stocks is relatively risky because they do trading in a larger market.
  • Buying through future contracts and derivatives: Gold investment using derivatives need you to have a sound knowledge about your finances. Gold derivatives include warrants, options, gold certificates, futures, etc. When you buy any of these, you are only buying a representation of gold on paper.

Gold investment has a few benefits:

  • It can be turned into cash easily and is a convenient payment mode accepted globally.
  • Compared to other holdings, the worth of gold increases when there is inflation because of its reliability and stability.
  • Gold prices are unaffected by political scenarios. The demand may be high or low but it never perishes.

Gold is not considered as a wise investment option by many, citing these reasons:

  • Gold falls into a category of investments that never grow. A single coin of gold will always be single, it won’t become double, as in other investments which will result in real growth and expand.
  • Mutual fund and real estate investments result in dividends but gold investment does not give income or dividends or any other profits.
  • The resale value that you get when you sell gold is less by 5-10% of its value. You end up in a loss rather than a profit.

In spite of these concerns, gold still holds a vital position in the economical structure of nations globally, especially in India. It has seen its ups and downs but the innate worth of this metal makes gold investment a wise choice even today.