Should you invest in gold this festive season?

First Published 7, Oct 2017, 4:35 PM IST
Should you invest in gold this festive season
Highlights
  • In the festive season the yellow metal sees huge demand around this time every year, especially in the form of jewellery
  • Gold works as a hedge against volatility inherent in market-linked securities such as equities
  • However,it has shown immense price volatility in the last few years, making it a risky investment for growth

Festive season has already begun and is keeping people in high spirits. Considered to be an auspicious period, this season gives people the perfect excuse to indulge in big-ticket shopping like, gold, property and vehicles. The yellow metal sees huge demand around this time every year, especially in the form of jewellery. Despite its slacking performance in the last decade, the metal has been holding its ground as a preferred investment option.

Let us look at how worthy gold is from an investment perspective.

Gold Prices In Last Five Years

If we look at the price swings in the last five years, gold prices have dropped from Rs. 31,523/ 10 grams in December, 2012, to Rs. 27,000/ 10 grams as of today.

Time

Average Gold prices for 10 grams

Sep-12

31,523

Sep-13

27,500

Sep-14

24,200

Sep-15

24,000

Sep-16

28,300

Sep-17

27,000

 

Should You Invest In Gold?

Gold has been known to be a hedge against volatility inherent in market-linked securities such as equities. What adds more weightage to its value is that the Government of India keeps gold as part of its forex reserve.

However, gold has shown immense volatility in its prices in the last few years, making it a risky investment for growth. Nevertheless, it does make an excellent weapon for defence against unfavourable economic conditions.

If you are looking to purchase gold as jewellery, don’t forget to take into account the cost you incur in terms of making charge etc as it won’t be recovered at the time of selling. Also, the prospect of value appreciation is completely dependent on the belief that someone will be willing to pay a higher amount for the same quantity of gold in future.

However, if you are looking to purchase gold as a defence instrument against market fluctuations, it can be good option.

Ways To Invest In Gold

Although, people prefer to pick up jewellery or gold coins during festivals, a more meaningful purchase would be to go for exchange traded funds (ETFs). You can invest in ETFs without having to buy physical gold. You can invest in ETFs through your demat account and the return is based on gold prices.

There is no fear of theft involved in this, as gold is stored in digital form. Investing in a digital form also gives you the convenience of buying and selling gold anytime without any entry or exit load.  

This festive season how about celebrating with a new gold investment idea.

BankBazaar is a leading online marketplace in India that helps consumers compare and apply for Credit Cards,Personal Loans,Home Loans,Car Loans and insurance.
 


(The author is CEO, Bank Bazaar)

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