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Gold as an investment – Investment Club

What are the different types of investments we can make in Gold?

Yes, investments in gold market have suddenly been in boom, especially after the recent stock market debacle. There are many modes which you could consider while you choose to invest in gold. Few popular options given below.

1> Buying Gold in physical form: This is one such type of investing in gold, which most people would be familiar with. You could either buy gold biscuits or even buying gold ornaments can also be an alternative. But there are few questions you must ask yourself before you choose these options: > Is your investment in gold for a long term or short term ? > Are you buying it with an intention of using it for a specific occasion like a marriage, birthday or for any other such eventful occasions? OR Are you buying it only for a purpose of investment? OR with a Multi Purpose Idea? More questions like these will certainly help you in your choice of buying gold. For Ex: If you decide to buy gold with a multi purpose idea, it’s always better to buy gold in denominations of certain smaller grams rather than a gold biscuit. Why? It’s only with a simple reason that, you can avoid any wastage that might be shoved off while you convert it into ornaments. For Ex: If you bought gold in the denomination of 5 grams/bar, so if you wish to make an ornament worth 25 grams… you could use 5 quantities of 5 grams bar. And conversely, if you instead bought a biscuit of around 100 grams… there are high chances of enormous wastage while you choose to dissolve 25 grams out of 100 grams gold biscuit.

Dis-Advantages of buying gold in physical form:
Yes Off course, buying gold in smaller quantities has its own dis-advantages too, that’s one reason why suggest you to ask your self, If your investment is for long term or short term? Why? It’s for simple reason that, its easier for you to convince your self to use 5 grams of gold for … “not so relevant purposes” OR ”purposes not accounted for earlier”. So it’s always advisable to buy gold in biscuits in denominations of 100 grams or 250 grams, if your investment is for longer term there by giving yourself less chances for probable irrelevant usages.

Also few more dis advantages too… Knowing how to safe guard physical gold, is something that you must & should be aware off before you make buying decisions. For example: if you wish to have it in a bank’s safe deposit locker [SDL], make sure it’s a trust worth move. Checking credential’s of banks SDL rules & the charges for it along with insurance coverage are few things that is worth while spending few minutes to think.

Where should I buy it from?
Gold is more accessible to the average person because an investor can easily purchase gold bullion (gold in its physical form), from a dealer or, in some cases, from a bank. It’s always advisable to buy gold from prominent banks as you get recognized certificates which can be redeemed in multiple commercial outlets in exchange for money. As per latest information, gold can be bought in the denominations of 2.5 grams & above.

2> Buying gold as Exchange Traded Funds [ETF’s]: Yes, this is another popular mode of investment in the western part of the world, but trend seems to be rolling in Asian countries too off late. Why Asia is given more prominence while calculating such statistical measures? Coz Asians are the largest consumers of gold & leads the market share world wide. Since gold is an internationally traded commodity, a globally accepted base value is given for it in the global market. For Ex: Usually gold value derived from New York stock exchange is considered as the true value globally & its denoted in US dollar as currency. Gold is currently trading @ $900/ ounce of gold. Note 1 ounce is equal to 31.1 grams of gold. Also please note, gold in measured in terms of Troy Ounce & not the normal Ounce… which is used for measuring liquid.

How do I know the right price of Gold? - The value of gold is indicated just like any other traded commodity in an exchange. For Ex: The gold is currently valued in Indian market @ 1,412 / gram. Many recognized sites on the web, provide details of such rates all most live. Usually these rates are denoted in terms of US dollar. So check out this hint to covert the rates from $ into INR. For Ex: If Gold = $900 & Value of 1 dollar in INR = 50 rs. Multiply 900*50 = 45,000/ounce. I Ounce = 31.1 grams. Divide 45,000/31.1 = 1,446 rs/gram.
[NOTE: ETF valuation in US is based on 1\10th of an ounce & is not based on fixed price/gram basis. Above valuation is valid only in India.]

Where do I buy ETF’s from? - All most every bank offers, Gold ETF’s off late in India. Amongst all others, UTI has been one prominent bank, that has seen consistent raise in public interest when it comes to ETF buying in India.

3> Trading Gold in Commodity Markets: This has been a comparatively lesser popular mode of investment in Gold. You can trade on Gold in commodity market, just like any other bullion or precious metals available in the market. MCX & NCDEX are two most popular commodity markets in India which you can rely for trade.