Investment in Gold.

In India gold is considered to be traditional method of investment by most of the individual. Almost every individual home has little bit of it. India is considered to be largest consumer of gold.

Investment in gold makes portfolio stabilized and protect it against market fluctuations. We all have seen in recent past, at the time of recession, though all other investment tool was giving negative return, gold emerged with positive return. As per statistics during the last 10 year, among the other investment tool available in market, like Nifty, PPF, Saving Bank Account, Fixed deposit etc. gold gave the highest return on investment i.e around 18.5%.

Gold is also considered as hedge against inflation, when inflation rises, value of precious metals also increases and hence they can be effectively used as a tool to hedge against inflation.

As compared to other class of assets gold is considered to be highly liquid assets. Even during any time of crises gold can be sold easily as this is considered to be valuable and it is easy to find its buyer easily. In India gold is considered as a sign of security as at any time these precious metal retain its value and earn reputation as safe investment.       

Gold is recognized worldwide as an underlying assets has got its intrinsic value and thus can be sold for same value in any part of the world. Gold can also be pledge for loan, loan against gold is easily available without much of documentation. There are many companies which offer loan against gold. Rate of interest on gold loan is much lower than any other loan.

Percentage of investment in gold varies from person to person depending on ones goal and investment objective. Many experts suggest that an individual should invest around 5 % to 15% of his portfolio in gold.

How to make investment in gold

When question comes for investing in gold people believe buying them in physical form or jewellery, but today there are numbers of other safe, secured and hassle – free ways to invest in gold.

a.       Buying in physical form: Investment in gold can be made by way of buying them in physical form i.e. in form of gold coins and bar through bank and jewellary. This method of investment is the simplest form but by this method one end up paying a premium for gold coins or bar purchased from bank and jewellary charges extra as making charges.

b.      Exchange traded fund, ETF : Gold ETF (Gold Exchange Traded Funds) are mutual fund listed on National Stock Exchange of India (NSE) and BSE. Buying Gold ETF is purchasing gold in electronic form. You can buy or sell them just like you buy or sell stock of company through your broker on NSE.

Benefits of Gold ETF:

(i)                  You can buy just one unit, each unit is equal to one gram.

(ii)                It is very easy to buy and sell.

(iii)               Quality can be assured.

(iv)              Accepted as collaterals for loans.

(v)                No worries for theft.

There are no silver ETFs in India as of now.

c.       Future trading on commodity exchange: If you are a speculator or a trader, then in India you can trade gold and silver futures which are traded on the National Commodity and Derivatives Exchange (NCDEX) and Multi Commodity Exchange (MCX).

d.       E-gold and E-silver: National Spot Exchange Ltd (NSEL) has launched a unique investment product in gold and silver on its platform, named e-gold and e-silver.

It provides an opportunity for small investors to invest in gold and silver in smaller denominations of 1 gram for gold and 100 grams for silver and in multiples thereof in demat form.

e.      Investing in shares of gold mining companies: This is an indirect way of investment in gold via the equity route, by purchasing shares of gold mining companies.

With the rise in the price of gold , the profits of the gold mining company could be expected to rise and as a result the share price may also rise.

However, there are many factors to take into account and it is not always the case that a share price will appreciate when the gold price increases. It also depends on overall market movement and overall economic scenario and performance of company.

Note: If you are considering an investment in gold, it is important to appraise yourself of the best options for your specific needs.