Is Gold a Sound Investment?
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Personal Finance
- Swati Tripathi
- 2022-12-10
- 03 min read
#gold investment

Diwali is round the corner, and so is a talk about all things gold.

All jewelry stores are gearing up for their biggest sale season.

Growing up, we all thought it was an Indian thing to do. Now, so many questions spring to mind.

The yellow metal is beloved worldwide, especially in India.

It is an obvious favorite among traditionalists. Easy to purchase, even in low quantities, without much risk. Gold is excellent for liquid investments and a good hedge against inflation too.

However, in India, it goes beyond the economic answers. There is sentimental value attached to it. It is a go-to purchase for occasions like Dhanteras, Diwali, and Akshaya Tritiya.

Gold is synonymous with fortune, abundance, and prosperity, for it is a symbol of Goddess Lakshmi.

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So why do the prices of Gold rise around Diwali?

The foremost factor in play is the increasing demand in the market. From 1-gram to 50-gram bars; delicate jewelry to heavy – there’s something to signify the welcome of Goddess Lakshmi.

That’s not it – post-Diwali comes the wedding season. Till Makar Sankranti in January, the season is considered auspicious for weddings. And Indian weddings and favors are resplendent with gold. There’s a high demand for dynamic designed pieces.

While the current market prices are ranging around ₹50,000 per 10 grams, they had hit a peak of ₹56,000 post-COVID.

During the lockdown, gold prices skyrocketed, crossing ₹50,000 in 2020 for the first time in 9 years.

The cause? Panic caused by volatile markets. People wanted a safer investment option where the value doesn’t erode. Markets in forex, equity, everywhere were contracting. This led to high demand for the yellow metal, pushing the prices further, since the supply was slow too, given the lockdown.

Gold is a traditional favorite but if you are new to the investment zone and don’t know how to go about it, you need to check multiple factors.

Factors to check before investing

  • Purity
    Check for the purity of the piece you purchase. 24 carat represents the purest gold. Most trusted jewelers and brands offer a purity range of 18k to 24k. This is where the alloy is durable yet precious. Higher purity means a higher value, with the highest assurance. A lower carat means an alloy with silver or copper, or both.
  • Making charges
    If you opt to buy gold jewelry, above the weight of gold/jewels, you also must pay the making charges for the ornament. Although the charges differ from brand to brand, jeweler to jeweler, you usually end up paying 10-15% of the gold value.
    If the design is machine-made, the making is lower, while handmade ornaments are more expensive.
    The downside is that making charges go down the drain when liquidating or selling the jewelry. You are only paid for the gold.
  • Hallmark
    The gold market in India is governed by the Bureau of Indian Standards.
    This bureau certified the gold you buy for its purity. Make sure to check for the hallmark sign on whatever you purchase. It is an indication of purity and authenticity.
    This helps especially when you want to sell the gold or sanction a loan against it. Gold without a hallmark usually fetches more charges for lack of authenticity.
  • Your aim
    You need to know what you want to do with the gold investment. If your idea is to simply purchase a token for occasions, a 1-gram coin does the work. If you want to purchase jewelry, the kind of gold you buy depends on your use.

Now that your agenda is clear, here are a few arenas giving you a background to decide where to invest and things to keep in mind.

Gold investment options

  • Jewelry
    Purchase your jewelry only from trusted jewelers or brands. While checking the design, don’t forget the weight, the making, the alloy, and the durability of the accessory.
    It is a heavy investment, so see where you’d like to use it. Hence, if jewelry is unnecessary for you, gold coins are a better option than paying extra for making jewelry you won’t even use.
  • Coins or bars
    The upside of purchasing coins or bars is that even quantities as low as 1 gram can be bought for occasions or gifts. It is easy on the pocket and easy to sell since they are hallmarked 24k coins.
  • Digital gold
    With all investments moving online, gold is not left behind. Gold is purchased on a digital platform, without having to hold it physically – reducing the risk of loss or theft. The platform appoints trustees to purchase and hold it on the behalf of the investors.
    While this is interesting, it is a newer concept and not fully regulated. So, remember to stay vigilant and do your homework before purchasing digital gold.
  • Gold bonds
    These are market bonds that derive their value from the gold market.
    They are just as liquid and a better option if you want the safety and liquidity, but not the use or glitz, or even the risk of theft. It provides a cushion against the volatility of the market while being profitable in the long run.

Also read: Insurance as investment tool?

Is gold a promising investment?

Tradition looks at its symbolism, divinity, and abundance as well as safety and liquidity.

However, it also changes with the changing economy, which makes it volatile in the short term.

Digital gold is not fully regulated while physical gold comes with its peril.

That said, it is great protection against inflation.

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The last word:

Traditional and safe methods of investment label gold as the perfect choice. There is no harm in investing a small amount in gold yearly. But if you are looking for higher returns, it is best to look at other investment tools.

Hope this helps!

Let us know what other topics you would like us to talk about!


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