Investing in Gold

We are living in times of digital currency and multiple forms of investment. So investing in gold might sound old fashioned to many. However, Gold has had its charm for ages. Ancient dynasties like Egyptians started using gold for ornaments and religious artifacts. Somewhere around 560 B.C. gold started to act as currency and was used for international trade. Gold represented the wealth of an empire. Though the actual form of gold is not used as currency in modern times, it is still a vital part of the global economy. Today, the entire world is coping with the declining value of currencies and rising inflation. Over time, gold has proved to be an asset that has maintained its value. Though not used for investment purposes as much in modern times, it still has its significance.  

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Below are some reasons for the importance of gold from an investment perspective:

  • Wealth in the form of gold can be preserved through generations.
  • The value of gold has increased over generations while the value of any currency drops due to inflation.
  • Gold wealth is safest during times of political and economic uncertainties. This has been proven in history.

Should you invest in Gold?

If you are not looking for a short-term investment then investing in gold is a good option. Gold has held its value remarkably over the long term. It is also a safe option for people who are concerned about inflation. As compared to physical gold, gold ETFs and gold mutual funds are safer choices. 

Following are the benefits of investing in gold ETF: 

Easy Trading: Unlike physical gold, trading can be done with 1 unit of gold which is 1 gram of gold. It is virtual so no minimum quantity required. 

Safe asset. Generally gold ETFs do not fluctuate very much. Hence, this form of investment is safer in terms of not resulting in major losses. 

Tax friendly investment: If the units are held for less than 36 months. (3 years) the value of the gold is added to income and accordingly tax is computed. However, if units of gold are held for more than 36 months, 20% tax is incurred. 

How does it work? 

Investing in gold is much more than buying physical gold like coins, jewelry, and bullion. Though purchasing gold bullion is considered to be most basic, traditional and most common way of investing in gold. It is called investing in investment-grade gold which is at least 99.5% pure. 

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Another way to invest in gold is by purchasing shares of gold mining companies. 

You can also invest in gold through exchange-traded funds (ETFs) and gold mutual funds. This can be done both online and offline though mutual fund distributor. One can choose to invest in through SIP (Systematic Investment Plan) route, which can start with as low as INR 500 per installment. 

Below is the process for investing in Gold ETFs


Step 1: You would need to open a Demat account and a trading account online. For this you would be required to submit PAN, ID proof, and residential proof

Step 2: Once the trading or Demat account is active, you would need to select a Gold ETF and order one. You can also choose mutual funds with an underlying gold ETF

Step 3: You will then get a confirmation sent through email and phone

Step 4: A nominal brokerage amount will be deducted for the transaction

Points to keep in mind before you get in action: 

Look for a stock broker or fund manager who has low charges for facilitating the purchase and sale. Generally the charges would range from 0.5 to 1 per cent. 

Keep an eye on gold prices. The best time to invest in gold would be when there is a fall in the prices of gold.

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