Making Money Out of an Obsession; Invest in Gold for Huge Returns

Indians are obsessed with Gold. We just can’t get enough of this yellow metal that we have become the largest importer of gold in the world. In 2010 alone, India imported a whopping 958 tons of gold; a clear indicator of our fixation with this metal.

We must realize that gold is not only an ornament but also an avenue for investment and trading. Moreover, gold prices are always on the rise, making it a safe investment to earn higher returns.

Ways of Investing in Gold

Gold prices have been rising over the years, which make it a sound investment option. The prices stood at $ 265 per ounce in the beginning of 2001 and ten years later the price is hovering above $ 1750 per ounce in November, 2011. An amazing increase of about 560%!

This brings us to the question as to what are the different ways of investing in this yellow metal:

Gold Coins and Bars: You can invest in gold by buying gold coins and bars. These are easily available in banks, jewellers, financial services companies or even at post offices. Gold coins are available in the weights of 5 grams, 8 grams, 10 grams, 20 grams, 50 grams etc. For higher weights, you can go for gold bars. Please note that these bars and coins are sold at a premium charges.

Only the jewelers who are the part of World Gold Council Network can issue these coins. Advantage of these coins is that, they have fewer premiums over the current market price and can be redeemed at the market price.

Bullion bars are good mode of investment but it is out of scope for a common investor, since minimum investment is much higher.

Gold (ETF) Exchange Traded Funds: Gold ETFs are just like any other mutual fund. With every purchase of unit, it will be backed up by equivalent purchase of gold. In this method of investing you can have gold without having to physically pile of gold. There is no need for you to worry about putting your gold coins and bars in safe deposits with the Gold ETFs.

Unlike buying physical gold, the purity of gold is guaranteed with Gold ETF. Even small investors can invest in Gold ETF, as the minimum amount starts at one gram.

As such, Gold ETF is proving to be an easier and safer mode to buy gold. The charges are very less and the gold can be accessed electronically. Backed by all these benefits, Gold ETF is getting popular these days with rise in gold prices. Some of the most popular Gold ETFs are Religare Gold ETF, Reliance Gold ETF (NSE Ticker: RELGOLD), Kotak Gold ETF (NSE Ticker: KOTAKGOLD) and UTI Gold ETF (NSE Ticker: GOLDSHARE)

Gold Mutual Fund: Gold Mutual Funds are very similar to other mutual funds. Here the fund manager will be investing your money in the purchase of gold. So these gold mutual funds do well when gold prices shoot up.

E-Gold: This option is best suited for small investors who cannot buy gold in bulk. E-Gold was introduced by the National Spot Exchange to facilitate trading in gold. It is an electronic trading mechanism like stock trading in the NSE and BSE.

One unit of E-Gold is one gram of gold and can be traded electronically just like ordinary shares are traded electronically. There is no need to buy and store gold physically. If the trader needs physical gold for the amount she invests, she can take delivery as in other commodity exchanges like MCX or NCDEX.

Jewellery: Buying jewellery is the most dominant and traditional way of investing in gold in India. Investing in gold jewellery is in fact not a wise investment. There are heavy losses in the form of designing charges and wastage. These charges vary from 10%-35% depending upon the jewelry design.

Tips on Investing in Gold

The idea for gold investment is to use it at times when the markets are falling and when the inflation is very high.

The last few years saw a spike in gold prices because of the financial crisis. Investors lost confidence in the markets and began to invest in gold to lower the risk. Several central banks around the world began buying gold, which was unprecedented, fearing a wide scale depression.

Gold’s significance in investment portfolio is to minimize risk and use it as a store of value. But considering the huge rise of gold prices, investors are viewing it as an investment option rather than a store of value.

If you wish to invest in gold in India, you must have an in depth knowledge of the market. Your research must not be focused on domestic markets alone. Because gold is an international commodity, you need to keep updating yourself about the world markets, economic and political situations and value of dollar. Only a holistic approach in research can help you invest in gold wisely.

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