Investing in Gold in the Modern Indian

Scenario: What’s the Deal?

Amidst all the massive technological and scientific transformations taking place
over decades and centuries, the one precious metal that is typically treasured
by individuals of all generations is gold. Whether in the form of ornaments
worn during occasions or investments deposited in the bank, the value of gold
has reigned supreme through innumerable economic crises and recessions.
However, that is not to say that there is no flip side to investing in gold. So,
what are the different pros and cons of investing in gold, and what trends can
one expect? Here’s a look:

What are the Pluses of Investing in Gold?

Investing in pure gold by means of avenues such as sovereign gold bonds has
always been an effective strategy to alleviate potential risks and reap steady
returns. Liquidating gold assets that one holds can provide one with sufficient
funds in case of bankruptcy and other unforeseen circumstances. Here are
some reasons why investors, traders and stock brokerage firms often look
upon gold investments as good investment strategies for fulfilling a plethora of
objectives. Here’s a closer look at the pros of investing in gold:

1. As a Backup in Case of Inflation

It is common knowledge that gold is the least affected metal in case of

inflation and other economic crises. And that’s why investing in gold
always “pays” when an economy is going through a rough phase where
stocks are not performing as per expectations. This makes gold a good
short-term as well as long-term investment strategy.

2. Hassle-Free Liquidation Process

One of the major advantages of investing in gold is that it can be

liquidated easily. There is always a demand for gold in the global market,
 which makes it easy for investors to sell his/her gold possessions and
thus liquidate the asset. On the other hand, the values of other assets
like stocks and ETFs may be subject to greater fluctuations and thus may
not be as easy to liquidate.

3. Significant Returns With Minimal Risks

Investing in gold is typically low-risk due to its perennial demand and

resistance to financial turbulences. Moreover, since gold is a precious
metal, it typically offers significantly high returns – sometimes even
more than those offered by investment in stocks and other securities.

4. As an Heirloom…

Gold has very high utility even as a family heirloom passed down
through generations. As a result, there is a huge demand for gold during
wedding seasons and other such major occasions. Many people also
purchase gold coins and biscuits as auspicious gifts for important
milestones such as marriages and anniversaries.

Drawbacks of Gold Investment

While gold investment is a largely lucrative and low-risk strategy, it is not

without its own set of shortcomings. Here’s a look at some drawbacks of
investing in gold:

1. Safety Concerns With Storing Gold

While its preciousness is its most important asset, this same quality of
gold can also prove to be a drawback when it comes to safety. There
have been a sizable number of theft and bank robbery cases with regard
to gold. While investing in gold in the form of avenues like gold ETF fund
is relatively safer, there is always some amount vulnerability in gold
 investments.

2. Lesser Returns on Gold Jewellery

When gold is purchased and converted into jewellery, there are

additional making costs involved in the same. However, when this
jewellery is sold in the market, the making charges are not to be
included in the total cost, due to which sellers may incur losses.

3. The Investment Does Not Grow.

While gold may yield huge profits when traded in the market, it does not
grow steadily like other investment strategies. As a result, an investor
cannot consider gold as a source of income for long-term objectives.

Gold as an Investment in India

In India, one can invest in gold either in the form of jewellery or through gold
bars and coins. One also has many lucrative gold investment options such as
sovereign gold bonds, ETF gold funds and investing in equities offered by
companies that deal with gold mining. Moreover, axes may be levied on each
of these investments as applicable. For instance, physical gold and gold ETF
funds entail a capital tax of 20%.
As 2019 rolls by and we welcome a new financial year, investment experts
believe that gold investments are likely to surge in 2020. According to an
Economic Times report, gold is expected to yield returns up to Rs. 41,500 per
10 grams by Diwali. Further, experts also recommend reserving 10% of one’s
investment portfolio for gold investments.

While gold investments have also witnessed their highs and lows over the past
decades and centuries, gold still remains one of the most treasured precious
metals of all time. It is often considered a lesser volatile investment as
compared to stocks and regular ETFs and trading strategies such as investing in
currency and commodities futures. What helps is a careful consideration of
one’s investment objectives and the current and expected gold prices before
going ahead.