The Complete Guide to Invest/Buy Gold This Diwali Season [2020]

Buying Physical Gold

Physical Gold is the most preferred instrument for investing during the Diwali season. Jewelry shops are well decorated for welcoming investors. But there are various factors to consider before buying physical gold in any form (jewelry, bars, coins). Let us discuss about them in detail:

Cost: Apart from the market rate of the Gold, there are various other expenses associated with owning Gold. The biggest one being the expense for storing because safety from burglary and thefts is one of the main risks associated with owning physical gold. If you are investing in jewelry and ornaments you need to pay the making charges. However, you can invest in gold bars or gold coins to save making charges.

Purity: The valuation of your gold depends on its purity. Purity of gold is measured in carats and 24 carat gold is considered to be the purest form of Gold. There are various hallmarks and markings on Gold which indicate the purity. Gold bars and coins have the maximum purity because the gold used for jewelry is often mixed for other metals for strength and the purity for the same ranges from 18-22 carats.

Liquidity: Before investing in ornamental gold and jewelry it is very important to know about the liquidity. Jewelers often deduct 15-20% when you try to sell back the jewelry bought from them. If you have invested in gold coins and bought them from banks, you cannot sell them back to the bank because as per the rules and policies of the Reserve Bank of India, banks are only authorized to sell Gold and not buy back the same.

Taxation: You should have a clear understanding of the incurred taxes before investing in Gold. At the time of selling your physical Gold, you will need to pay a tax of 1% on the total amount of Gold sold. However, this tax slab is different when you are trading or investing in electronic forms of Gold.

Reputation: It is recommended to buy gold only from well reputed brands which are well established and have a proven track record for authenticity. Investment in physical gold can also be done by buying gold coins from banks. This will be considerably safe because the bank will issue a certificate of authenticity with every purchase. Your gold will also be in a tamper proof packaging. But the drawback of this will be that the price of that will be higher than the prevailing market rates and can even be as high as 10% in many cases.

Investing in Gold

Apart from physical Gold, there are various other options for investing in Gold. Some of the best alternatives for investing in Gold are:

Gold ETFs: Gold ETFs or Gold Exchange Traded Funds are mutual fund schemes. The difference they have when compared to conventional mutual funds is that these schemes only invest in Gold. Investors are allocated units of Gold where one unit generally represents 1 gram of Gold. You can trade and invest in these units on the stock exchange.

E-Gold: This is one of the latest options for investing in Gold which was launched by the NSEL. It is an electronic method for investing in Gold. Unlike Gold ETFs, the investor is the direct owner of the Gold. This is one of the most preferred alternatives to physical gold because it allows you to hold the ownership without the risk of security.

Equity Based Gold Funds: These are again mutual funds which involve investing the investors’ money into the stocks of companies which are involved in the processing of Gold. This includes companies which perform extraction, mining and other activities involved in Gold processing. This also incurs numerous risks a thus it is recommended to have your risk profile analysis before investing in equity based gold funds.

Gold Futures: One of the most preferred option of investing in Gold, investing in Gold futures require experience and knowledge about the commodity markets. If you are new to the market you can subscribe to the Prime Gold service, which helps you trade in the Gold Futures by providing research based recommendations.

These are some of the best options for investing in Gold this Diwali. You can ick any of these as per your requirement. However, it is important to note that all these investments have some type of risks associated with them. Therefore, you should pick your investment option considering all the parameters like capital, risk, risk profile analysis, time horizon etc.