Numerous ways to Invest in Gold

Oct 24, 2013 No Comments by

The recent fall in the price of Gold coupled with auspicious days like Akshaya Tritiya had spurted the demand in the local market. This led to a marked increase (amounting to more than 100%) in import of the yellow metal in April 2013. This has resulted in further increase in the Current Account Deficit, which has been a cause of grave concern for the RBI.

As a result, the government has been increasing the import duty on gold and also placed a ban on Gold import on 13th May 2013.

Overall this calendar year the price of Gold has witnessed a correction by more than 15%; hence it may be a good option to include Gold to be a marked percentage of your overall assets. There are various ways in which one can invest in Gold and some of the options include:

  • Physical Gold – Historically, this has been one of the most popular ways of buying gold in the form of a coin or a bar. However, this investment has a few drawbacks. Firstly, it is of high risk as you would be storing physical gold. Secondly, the challenges in getting the right price and purity eventually can be an issue; and lastly in case it is jewelry you incur additional costs like making charges etc.
  •  Gold Exchange Traded Funds (ETFs) – Gold ETFs are becoming very popular and are a convenient way of investing in Gold. An individual requires a D-Mat account to purchase Gold ETFs in electronic form. The liquidity in this instrument is very good and unlike physical gold it eliminates risks like storage or quality. Gold ETFs are represented in units and one unit matches the price of one gram of gold in the spot market. It can be bought and sold like a stock on the stock exchanges.
  •  e Gold –This is another virtual way to invest in Gold through National Spot Exchange. Again, every e gold unit equals one gram of gold. The added advantage with this option is that the units can be converted to physical gold when taking delivery, by surrendering the e gold units. The procedure for this is fairly simple, with the presence of delivery centers in all major cities including Bangalore. This type of investment is most suited for investors with an eye to converting it to jewelry at some future date and wishing to avoid risks like storage and purity.
  •  Gold Funds – These are Mutual Funds investing in Gold ETFs. It exposes investors to Gold in a systematic way; like the Systematic Investment Plan. The only drawback it has is that there will be a charge payable for managing the fund in the range of around 0.5% – 1%. Gold Funds are bought and sold like Mutual Funds.

Investors need to understand their specific requirements, carefully assess their current asset allocation and select the investment option best suited to them.


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