Gold As an Investment in India

"Gold As an Investment in India"," We are the world's second largest consumer of the yellow metal after the Chinese.
 Historically gold has worked as a hedge against inflation.
 So far in the recent past, with turmoil in the global economy gold prices have witnessed tremendous hikes and corrections too.
 This makes sense whether you intend to splurge at a wedding, or keep it purely as an investment.
 As an investment gold can make you richer as it appreciates with time.


 Any investor must not have 5-10% of their total assets as gold.


Physical Gold


Jewelry


If you are actually going to use gold as jewelry, nothing is better than buying it in that form.
 But there is eminent wisdom in buying gold as an investment too, to about 5%-10% of your total assets.



Bars, Coins


The first people in the gold selling business are the Banks, with their gold coins and biscuits.
 Not surprisingly, this is probably the most expensive way for you.
 You then have to spend on a locker to keep it safe.
 Some of them may refuse to buy coins sold by others and may demand making charges.
 The interest may not be attractive but you can get exemption on wealth tax and capital gains tax.
 You can deposit ornaments if you're willing to have them melted into uniform bars.


Gold Mutual Funds

If you do not have DP or trading accounts a good way to invest in gold is through Gold Mutual Funds.
 There are gold-related funds such as the DSP BlackRock World Gold Fund, AIG World Gold Fund, Reliance Gold Savings Fund, Kotak Gold Fund, UTI Master Gold Fund, to name some.
 Here the prices move faster and further in both directions than the price of gold.
 A great advantage with Gold MF is that you are not compelled to buy complete units unlike in an ETF.
 You have the option of systematic investment too so you can buy for as little as Rs 100 every month.
 Best of all, you can redeem them at a day's notice, at the prevailing market price (NAV).


Gold ETFs

If you have DP and trading account, gold Exchange Traded Fund (ETF) is the better way to buy.
 Currently there are 11 ETFs listed in the NSE/BSE.
 These ETFs too buy the metal on your behalf and store it for you.
 A unit is close to 1 gram of gold.
 Loans can be availed against units.
 Some have larger allocation in cash, money market instruments than others and may reflect gold prices better.
 E-Gold is similar to shares that are bought on the stock exchange.
You need to have a trading account and a demat account (separate from that for shares) with a DP linked to NSEL.
 The DP charges an annual maintenance fee of around Rs 350 and transaction fee for every transaction much like it is in stock exchanges.
 Since it is a pan-India exchange prices are same throughout the country.
 Loans can be availed against units.
 If you decide to, you can convert the E-Gold units into physical gold through rematerialization.
 A conversion fee is charged which depends on the amount of gold converted and units can be exchanged for coins or bars.
 E-Gold as an investment vehicle is yet to catch up with investors.
 When the market for it is sufficiently large E-Gold could become the best way to accumulate gold for investment in the long term.

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