Generally the World Gold Council (WGC) aggressively markets social and religious functions mainly as gold buying events. Hence the demand for this precious metal has risen in the recent years to all time high levels. Research reveals that thousands of tonnes of gold to be found in households particularly in the form of jewellery. This represents a very high value according to the market price only comparable to the foreign exchange reserves. Here are some facts you should know when investing in gold:
As an investor you need to be aware of the various forms of buying gold. Jewellery, remains the most traditional and common form of buying such gold in India. However this is not always perceived as an investment per se. The main reason for such perception is the fact that there are wastages and associated charges that transform into heavy losses. Bank coins also may not be an investment idea because the premium charged by banks is in the range of 5-10 per cent.
Bullion bars may be a better mode for investment although the minimum investment may be considerably higher.
Gold Exchange Traded Funds (ETFs) are the best option currently. These are similar to mutual funds that deal only with gold. In fact these are becoming an easier and safer mode of buying gold with less charges and electronic access.
Ultimately gold scores highest as far as liquidity is concerned and when compared with other investments. Gold is easily and quickly converted to cash. For example most banks can give you a jewellery loan.
As concerns taxation, gold attracts capital gains tax and hence it is better asking your jeweler for the bill. A greater percentage of what is traded remains unbilled which can affect your investment prospects.
The current income
Gold which is within any form will not give you a current income apart from dividends in gold ETFs. However the only cash outflow is for locker maintenance.
Gold has provided the perfect hedge for inflation although its returns can not be comparable to real estate and shares for instance which is higher.
Gold has no risk and you will hardly see its deflation in the real sense. The only real risk when you buy gold is the investment opportunity cost for other avenues with higher returns.