Tips to Invest in Gold


#1

The Gold value has witnessed a steep plunge in the last few weeks. The price is still not very stable and it is expected to find a new low in the coming days before a consolidation phase starts. At this point it is advisable to opt for SIP in gold ETF or a customized systematic buying in NSEL gold.

  • Physical gold is trading at a hefty premium over the actual price because the jewelers are sitting with older purchase and therefore they are reluctant to sell at a loss. On the other hand you will easily get ETF or NSEL gold at the actual price and without any risk.

  • In demat you can even buy 1 gram at a time but while buying in physical form you won’t get a flexibility of size. The buy and sale price of physical gold are different i.e. usually the jeweler sells physical gold at premium rate but when you will go to the same jeweler for a resale then he would buy it at discount price.

  • In demat form you can sell the gold at prevailing market price immediately. There are some special benefits of investing in ETF such as LTCG tax after 1 year, no wealth tax, high liquidity and low transaction cost.

So it’s better to opt for a SIP in gold with a ETF/demat form.


#2

Hi MKumar,

If you are looking to invest in gold, a gold investment scheme offered by a jeweller may not be a great idea. Investment in physical gold is highly susceptible to theft and burglary. However, if you invest in an ETF or gold bonds, then you can keep the investment safe. Physical gold requires careful handling and is unsafe when kept at home. ETF and gold bonds are kept in dematerialised form and held in a demat account, therefore it is very safe and easy to handle.

If you hold physical gold, ETF or gold bonds for more than 3 years, then it is considered a long-term holding and becomes eligible for long-term capital gain (LTCG) at 20% with indexation. Selling before 3 years is considered a short-term capital gain (STCG) and the gain is taxed as per the applicable slab rate of the individual. However, gold bonds allow one more advantage on the tax front. If you hold it until maturity and redeem it after its maturity period, then the complete gain is tax exempt.

The rates of ETF and gold bonds are linked to physical gold rates. So, the capital appreciation benefit of all the three investment products are the same. However, in addition to capital gain benefits, gold bonds also offers interest at 2.5% p.a. on the invested value to its investors. So, if you are investing for a very long period, then 2.5% p.a. interest can make a big difference to the overall return.

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Cheers,
BB Expert


#3

Dear MKumar,
Hope you would be well.

If you are looking to invest in gold, You should keep certain things in mind before investing in gold.

  1. Understand what factors influence gold prices
  2. Realize being a gold bug doesn’t pay
  3. Properly evaluate gold miners
  4. Know the tax ramifications