Gold Investment- Pros & Cons in Indian Market

investor’s monetary goals in a way. The most singular and valid reason that places gold in the upper region is the fact that in the market, gold’s value never faces a drawback.

The prices always go up on a rollercoaster that does not come down. This is the sole reason that has attracted millions of people into investing in it to procure higher returns in the distant future. However, there are two sides to a coin.

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An object with pros is accompanied by the fair share of cons. In this article, we will intricately look at the possibilities and the analysis/takeaways will be left for you, the reader, to decipher.

First off, let us start with the kind of gold investments and how they differ from the another. The two roughly laid options include the physical and the non-physical/digital investment.

Physical Investment

The physical investment is the traditional method of investing into gold, i.e. buying gold and jewelleries and stashing it into the lockers. Now, having the physical form of gold is just a translation for cash at disposal.

Pros:

1. Keeping the physical form of gold always provides a person with a sense of financial security.
2. By adopting this method, one can escape the formalities (paper works, etc.) that come with other modes and requires a maintenance.
3. No demat (paper) account is needed in buying gold.
4. One can actually avoid the thorn in one’s flesh by conveniently making a purchase without suffering at the hands of tedious procedures.
5. Since the value of gold increases with the passing of time, when a person sells it in the future, he gets the amount that the market has at that point in time. Which is to say, he has earned profit.

Cons:

1. One can always subjected to high risks if he has physically accumulated gold stored in his house or similar locations in terms of theft or burglary.
2. Buying gold in the physical state calls for the making charges and other taxes which is avoided to the maximum when investing via other mediums.
3. The offers and other perks that come with investing in funds or digital mode cannot be benefitted in directly buying gold.
   

Digital Investment – Gold ETFs

Technology-fuelled modes or the digital forms of purchasing golds include: Gold ETFs (Exchanged traded funds) and gold funds. Gold ETFs are the paper equivalent of buying gold, that gets stored in digital form. Gold funds, on the other hand, incorporate investing in gold mining firms. 

Pros:

1. No risk of theft or being lost in the process because it remains sound in a stabilised environment.
2. Since it is an evolved and a modern procedure to invest in gold, the security boundaries are stronger.
3. As the market prices of gold skyrockets, the interests are increased proportionately and can be enjoyed that way.
4. As for gold funds, no demat account is required.

Cons:

1. A demat account is required to invest in gold ETFs.
2. A long list of formalities and other procedures await the person which can be tiring at times and cause mental frustration.
3. Gold funds do not get affected at the fluctuations in the market price. It mostly counts for a con because if the prices catch the higher note, gold funds do not respond to the change leaving out any scope for better returns.

Conclusion: Gold Investment

The general convenience one gets to sail with is that gold investments employ risks that are smaller in magnitude when compared to the stock investments. In the long run, gold is sure to give out returns. A win-win situation. However, treading along the same path, we can all see eye to eye on the fact that investments that are upheld in other forms rather than in gold, they usually churn out higher returns (not considering the risks associated).

The conclusion really depends on the person’s needs, plans and what exactly one is looking for. If he figures out the points to be in his favour, he might as well go ahead with investing in gold.

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Disclaimer: The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof.