Indians have such a special relationship with gold that India is the second largest consumer of gold in the world. Whether it is Diwali, Dhanteras or Akshaya Tritiya, buying gold on these festivals is considered auspicious. The annual gold consumption in India is 800–900 tonnes.
Gold imports have declined by 99 percent in May 2020 due to the Kovid-19-induced lockdown in India to 1.4 tonnes compared to 133.6 tonnes in the same period last year.
The precious commodity is taxed at a steep rate of 12.5% to prevent excess purchases. But gold hoarding is not always a bad thing and it is an unbreakable part of India's strong culture of savings. So should you invest in gold at this time. Today we are going to tell you about this.
Is it the right time to invest in gold?
Analysts believe that investors must keep gold in their portfolio. Manish Bhandari, MD and CEO of Vallam Capital Advisors told ET Now that he is advising his clients to increase the allocation of gold for two years.
Gold has always been considered a safe investment. So investing in gold is a good option at this time. Gold supply has increased by only 1% per year in the last 10 decades.
With low interest rates, a high probability of depreciation of the US dollar, increased liquidity due to global fiscal stimulus will increase demand for gold which will lead to higher prices.
Different ways to buy gold
Gold can be purchased in physical form or through financial instruments or paper gold i.e. gold exchange traded funds (ETFs) and sovereign gold bonds, gold mutual funds etc.
Jewelery: There are concerns such as high cost, design charges, loss of time of manufacture 'and selling when buying gold as jewelery. Gold making charge can be between 10% to 40%.
Gold Coins (Physical Gold): Gold coins or 'guineas' can be purchased from jewelers, non-banking financial companies (NBFCs) and even e-commerce websites. The government launched the Indian Gold Coin in 2015 to boost investment in gold. The indigenously manufactured coin and bullion is of 24 carat purity, 999 fine and has the national emblem of Ashoka Chakra on one side and Mahatma Gandhi face on the other side. Coins are available in denominations of 5 and 10 grams while bullion is available in 20 grams. It comes in tamper proof packaging.
Gold saving scheme Like a
fixed deposit, you can deposit a monthly amount for a chosen tenure in a gold saving scheme and buy the metal at the time of maturity. The price of gold is calculated at current market prices.
Paper gold scheme
Investing in gold ETFs is the most economical way to invest in a commodity. All fees are covered by 'making charges', storage concerts, security risks.
Sovereign gold bonds
Another form of paper gold is SGB which the government issues on an 'on-tap basis' every week for two or three months.