There are two types of reasons to buy Gold currently- Domestic reasons and Global reasons. But first let us look at the reasons to buy gold during the pandemic situation.
Why Buy Gold Now?
For the First Time, Gold is Accessible at a Discount
Dealers in India are offering a Rupees 2 per ounce discount over local official pricing, compared to the premium charged a few weeks ago, amid the crisis caused by the Covid-19 second wave.
The Revival of the Indian Economy is Once Again Jeopardized Due to the Second Wave of Covid 19
The country is currently dealing with Covid 19’s worst-case scenario. And this, too, indicates that economic activity is being disrupted. It is now that gold gets sheen, i.e. the downward spiral is once again beneficial to gold and serves as a reason to buy gold.
Equities are a Risky Investment
We can talk about equities volatility recently, as evidenced by the market behaviour on May 4, 2021, when Indian indexes began on a strong note before becoming flat and then falling by 1% as a result of the unabated Corona and Indian Premier League postponement. People migrate to other investments as a hedge against positions in other assets as well as to diversify their portfolios in such a circumstance.
What are the Top Reasons to Buy Gold in India?
The top domestic reasons to buy gold in India are:
Liquidation is Simple and Straightforward
One of the main reasons to buy gold is to make any financial investment and to have a backup in case you need it in the future. If you need to sell your gold to make ends meet, all you have to do is sell it to the buyer of your choice. There are always willing customers for gold. But keep in mind that the return rate isn’t always what you’d expect; in fact, in the case of physical gold, you’ll get less than you put in. This is one of the reasons to buy gold in India.
Invest to Protect Against Inflation
An inflation hedge is something that maintains its worth even when prices rise. In terms of investing, all you want from your investment is for it to maintain its worth at all times, including during periods of inflation.
Hard assets, such as precious stones, hydrocarbons, and precious metals like gold and silver, are proving to be a wonderful hedge against inflation, according to the general tendency. Let’s take a look at the history of gold rates in Chennai to see how gold has performed as an inflation hedge. Past data shows that gold rates in Chennai climbed at a pace of less than 0.5 percent per year over the twentieth century, implying that the value of gold stayed nearly constant for a full century. As a result, in 2021, gold investment can be relied upon as an inflation hedge.
Tangible Asset
Gold is a tangible commodity and is the best reason if you are wondering why to buy gold now?. Accidents such as fire and flood have no effect on it. It also doesn’t require any further investments for security or upkeep. Furthermore, it is immune to digital security problems that internet investing methods are vulnerable to, i.e. gold is unaffected by both hackers and natural disasters. Furthermore, gold is beneficial even in times of commodities crises.
Diversification of Your Assets
An individual’s investment portfolio is made up of all of his or her many investments. Some of the greatest investment portfolios, according to market analysts, are those that incorporate investments made in a variety of ways rather than those where the total investments are concentrated in one or two sectors. The stock market, real estate, mutual funds, and gold are some of the most common investing industries. Only gold, as previously said, is unaffected by market fluctuations in its value.
Market experts argue that diversifying investment portfolios is better since, even if one area of investment has a crisis, other investments can provide you with a hedge against the crisis. The one reason to buy gold is due to the fact that gold is the ideal hedge in these instances due to its stable prices. Investing in gold is one of the finest methods to diversify your investment portfolio while lowering the risk associated with other assets because it is unrelated to market performance.
What are the Global Reasons to Buy Gold?
As a Dollar Hedge, Gold can be Purchased
Despite the fact that the US dollar has no direction, any dip in the currency will benefit gold. Higher dollar liquidity will weigh on the currency and be favourable for the gold price as the US central bank is expected to release more stimulus to support the economy.
Cryptocurrencies have been on an Unstoppable Upward Trend, Fueled in Part by Speculation
Recently, some assets have been diverted from gold to bitcoin and other digital currencies, which have seen a dramatic increase in confidence and global institutional acceptance. But, because the risks associated with cryptos can be significant, having gold in one’s portfolio is always a good idea. It acts as a hedge against risk from other assets because it is credit and default risk-free.
The US Federal Reserve and Other Major Central Banks’ Interest Rate Outlooks Remain Dovish
The US Federal Reserve left short-term interest rates anchored near zero and refused to abandon its cheap monetary policy at its recently finished meeting, favouring gold.
How to Buy Gold Now?
Now that we know the reasons to buy gold, let us look at some of the ways we can invest in gold in India. The following ways are as follows.
Gold ETF
ETF stands for exchange-traded funds. Investing in Gold ETF involves investing in funds that invest your money in genuine gold. ETFs that invest in gold are known as gold ETFs.
If you want to make some real money investing in gold, a gold ETF is a better option than physical gold, given the performance of gold rates.SBI Gold ETF, Kotak Gold ETF, INVESCO India Gold ETF, and others are some of the most popular gold ETFs in India.
To be more technical, gold ETFs invest your money in 99.5 percent pure gold, with approximately 90% of your investment money going into actual gold and the balance going into debt instruments. These are some of the reasons to buy gold ETFs.
Gold Savings Funds
Gold Fund of Funds, commonly referred to as Gold Savings Funds, is mutual funds that only invest in gold exchange-traded funds (ETFs). One of the major reasons to buy gold funds is that investors do not need to have a DEMAT account, making it a little easier than investing in Gold ETFs. If you’re a novice investor, gold saving funds are a safe pick because you don’t have to worry about watching your investment’s success, and it’s also a systematic investment approach.
Gold in its Purest Form
The oldest technique of creating a gold investment is to buy actual gold. Whenever you purchase gold, you are essentially making a gold investment. But, because we’re talking about gold as an investment, there are two methods to do so: jewellery and bars and coins.
Jewellery Made of Gold
Why buy gold jewellery?. Gold jewellery is readily available from any jeweller, and the return rates are solely determined by current gold rates.
Coins and Gold Bars
Although gold bars and coins are similar to jewellery, they are distinguished by the fact that they are produced of pure gold and do not include any manufacturing costs. This is one of the reasons to buy gold bars rather than gold coins. If you just want to invest in genuine gold, coins and gold bars will always be more profitable than jewellery. Gold jewellery returns are never lucrative due to the making charges.
Stocks in Gold Mining
Investing in gold mining stocks is comparable to investing in the stock market, with the exception that gold mining stocks are associated with gold mining firms. The performance of these equities is largely determined by gold rates, but additional elements to examine include production costs, good management, and hedging operations, among others.
Investments in Gold are Subject to Taxes
A wealth tax of 1% of the whole investment is applied on investments of more than 30 lakh rupees. Physical gold and gold ETFs are subject to a 20% capital tax.
In India, Who Decides the Gold Prices?
Because there is no such thing as a “kingmaker” in the Indian gold sector, gold prices are mostly established through an informal process. Gold rates in India are influenced by international prices, albeit they may not be identical to those in other countries. In India, gold is mostly imported by banks, which then sell it to bullion dealers around the country. Banks sell this gold to dealers after charging a fee, which already raises the price over the price at which the gold was imported.
The Indian Bullion Jewelers Association, or IBJA, is a crucial player in deciding gold rates in India on a daily basis. IBJA members include the country’s largest gold dealers, who have a collective say in setting pricing. These individuals represent nearly all of the legal gold sold and purchased in India, and they hail from all corners of this vast country.
The IBJA begins the process of setting pricing by speaking with the country’s ten largest gold dealers. Based on the price at which they purchased gold, these dealers provide ‘buy’ and ‘sell’ quotes. IBJA then calculates the average of these ‘buy’ and ‘sell’ quotes and uses them to calculate the gold rate for a given day. This average rate has been adjusted for local taxes, and a rate has been set as a result.
Dealers calculate their ‘buy’ and ‘sell’ rates by multiplying/adjusting the international cost of gold by the exchange rate of the Rupee and adding any import tariffs and taxes, such as VAT. Dealers make careful to include their margin in the rates they offer, taking into account their needs. This system assures that gold rates in India are in line with international trends, and buyers may buy gold without fear of being taken advantage of.
To Conclude
One of the harsh realities of most financial investments is that they necessitate some level of pre-knowledge on the part of the investors in order to generate good returns, which is why many people avoid making any financial investments. Gold investments, on the other hand, do not necessitate any prior knowledge, particular abilities, or an investor’s mindset, making them ideal for people looking to make their first investment.
Another advantage of gold investments is that predicting their performance is simple because gold prices are all that matters. This means that investors will have to worry less about their investments and will only need to monitor the current gold rate.
Read More: Why is the Gold Price in India Increasing? Top Factors that Influence Gold Prices
FAQ
Is now a good time to invest in gold?
As part of a well-balanced portfolio, gold can be a good financial item. Gold has some of the most liquid markets in the commodity world, and its value has risen steadily over time.
Is gold ever worthless?
Although the price of gold fluctuates in the short term, it has always held its worth in the long run. It has worked as a buffer against inflation and the depreciation of major currencies over the years, making it a worthwhile investment.
What is the best way for me to get real gold?
You can buy gold bullion from a variety of sources, including an internet vendor like APMEX or JM Bullion or a local dealer or collector. A pawn store may sell gold as well. As you’re buying gold, keep track of the spot price so you can get a good bargain.
What is the maximum amount of gold I can own?
Fortunately, an individual’s ability to acquire and own gold bullion is unrestricted. There are no rules stopping people from purchasing as much gold as they want. You can buy and store as much gold bullion as you can afford.
Is it possible for me to sell gold to a bank?
Many people think about selling gold to a bank. The bad news is that, because of a lack of evaluation options, most institutions refuse to accept gold. Because the gold price has risen so dramatically in the previous ten years, many counterfeit coins and bars have arisen.
