Is Gold Investment a Good Idea in 2017
India's love for gold is well documented. The fact that India is one of the largest importers of gold comes as no surprise. Indians, particularly south Indians, have a particularly emotional bond with gold. It is also perceived as a popular investment tool—one of the major reasons why Indians buy gold, although tradition and culture also explain the allure of gold.
How to invest in gold
Gold is a generally safe instrument for investment due to its significant appreciation in the past. Even though Indians participate in other investment channels, like real estate, investing in gold still forms a significant part of the average Indian's investment portfolio. Following are some ways to invest in gold in 2017
Gold jewelry:
This is the most popular way of investing in gold in India. It is common for people across all economic classes to buy gold on festive and auspicious occasions like Akshaya Tritiya. However, there is one disadvantage to buying gold jewelry—you need to pay for the making charges and wastage, which could add up to another 10–20% to the price. Moreover, you might not receive the same price for your jewelry when you want to sell it.
Gold coins, biscuits, and gold bars
Gold coins, biscuits, and bars are another option for investing in gold. You can get coins in differing weights as per your budget. You can buy coins from the bank or from a certified jewelry showroom. However, keep in mind that banks only sell gold coins and do not buy them back, so you will need to sell it to a jeweler.
Gold ETFs
Traditional forms of gold investing, like buying jewelry, are slowly paving way for newer forms of investing, like ETFs, gold mutual funds and derivatives.
Individuals looking to invest in gold can buy Exchange Traded Funds (ETFs). Investments in gold ETFs can be done online. Each ETF unit is equivalent to 1 gram of gold. ETFs, enjoy a few advantages over buying physical gold—since ETFs are traded on the stock exchange you can buy and sell easily and there are no liquidity issues. You need not worry about the safety of the gold since your gold ETFs is held in a Demat account in an electronic format.
Gold mutual funds and derivatives
You can choose to invest in gold mutual funds like a fund of funds (FOF) that holds units of other gold-related funds. Or you can opt for a fund that holds stocks of gold companies listed on the global stock exchanges.
Another option is to trade in derivatives. Keep in mind that trading in derivatives is a high-risk investment option. To do this you will need an account with a commodities broker and you must pay charges on the trading.
Coming to the question—Is gold investment a good idea in 2017?
Before you invest in gold, you need to keep in mind that gold prices tend to rise and fall for a variety of reasons. It requires constant attention, disciplined monitoring of market movements, and an ability to evaluate pricing information. Only then, you will be able to get the most out of your gold investment. Experts suggest that the best time to invest in gold is when you are expecting an inflationary period.