Gold – the much coveted metal, makes waves in the Indian market every season. Indians consider gold as a symbol of wealth and sanctity. Yes, Gold is definitely a measure of wealth and the metal has stood the test of time. Every social or economic class in the Indian society buy and use gold in some form. Gold is versatile in nature, because of its significant ability to perform as a currency, commodity and investment.
Let’s take a quick look at why gold is considered a precious metal and the reason it’s highly valued in the national and international markets and by the common man.
- Gold is not just rare, it is an ancient metal that was used to make currency.
- Gold also has many uses. It has served quite a few needs of mankind over the centuries.
- Undoubtedly, India is the largest consumer of Gold in the world.
- For most part of the 21st Century, Gold was used as the world reserve currency; President Nixon decided to snap the use of the Gold Standard for United States in 1971.
(The Gold standard did not allow countries (or the government of the respective country) to print money if they did not possess that much of Gold)
- Gold is a largely traded commodity. It goes without saying that Gold is valued and is always an in-demand commodity.
With all that said about Gold and its significance in the National and International Market, let us now understand how Gold can be of value to the common man; in the context of this blog, the retail investor.
Gold definitely means Liquidity and Asset Creation. It also is a symbol of your wealth and status. Wear it and flaunt it, or sell it to feed yourself during times of crisis. It’s up to you!
But it’s definitely not hard to get in India.
While traditionally gold was held mostly as jewelry, the retail investor today can invest in gold in a variety of ways.
Trade them as Futures
The retail investor can buy Gold in the Futures market on the MCX. (Multi Commodity Exchange of India) Buy gold for a pre-determined period and settle the amount before the expiry of the period based on the index value of the gold at the time of expiry. Gold Futures are risky, just that they are more relied upon for returns than the other commodities.
Gold Exchange Traded Funds
Buying a Gold ETF means that you are buying E- Gold. It is gold purchased in the electronic form. This is an investment option where the returns are relative to the domestic price of real gold. The gold ETF offers you the amazing flexibility of buying one gram at time. If Ashwatha a home-maker is making a small saving of INR 3000/- every month, and decides to buy physical gold at the current price of INR 2940/- per gram she will have to shell out an additional 12% -15% as making charges or wastage if she buys gold in the physical form or as jewelry. Instead, she can buy e-gold and save on additional charges and do so every month. Ashwatha will also benefit by holding the gold at an average price, as she will be buying them at different prices every month. Ashwatha can do this from the comfort of her home and track the value of gold she holds on a daily basis.
Gold Coins and Bars
Buying gold coins and bars from the bank can assure you some quality, however, banks do not buy back gold coins or bars. Instead you can buy gold from the local merchant who gives a buy back guarantee. The wastage and making charge on the gold coin or bar is very minimal. Moreover, banks charge a premium of 7-10% above the gold price.
Well, the last one is our very old traditional way of buying gold which is as jewelry. All that one needs to watch out for in this form of buying is the money they lose as making charges or wastage.
As far as inflation goes, experts have different opinions when it comes to debating whether gold is a good investment that can beat inflation. Definitely investment-worthy, Gold has a high perceived value in the Indian Society when compared to other forms of assets. This perceived value is because of its liquidity and utility. Talk to a financial advisor today who can help you figure out how much of ‘gold’ is good for you.