The gold prices peaked during the earlier phase of this month [March 2024]. This was mainly due to various global economic cues and other geopolitical issues. However many are wondering how did the price hit such a peak. This blog contains more insights on gold investments and gold price trends.
Backdrop:
The major reasons for this price hike are increase in market volatility, decrease in currency, decrease in US Treasury yields and other geopolitical tensions.
When the investors loose confidence in stocks and bonds they start to invest more in gold. This trend was observed during wars like, during Isreal- Palestine war the gold prices surged.
Another trend which was observed is,whenever the stock markets crashed, the gold rates hiked.Also, when the US treasury yields or other bond yields decline the gold gains focus.
Whenever there is a geopolitical tension gold is considered as safe-haven for investors. Even when there is fear of rise in inflation, people rise their stake in gold.
The doubled nearly 2.5 times from the levels in 2015. So the gold investment is a better option for a long term perspective.
Present scenario:
The gold rate reached its peak during the beginning of March this year.
Even the fund inflows to gold etfs also increased significantly. Also, if there is Fed rate cuts, investors might prefer to invest more in gold along with other investments. So this is considered as right time to invest in gold by many investors and analysts.
Ways to invest in gold :
1.] When we say gold, the first thing that comes to mind is physical gold in the firm of jewelry. But this investment option is not considered the best. The reason they say is, consumers of gold pay 3% of GST, the making charges for the ornaments bought in gold and also the cost of holding it physically is more as there is more security risk.
So people thought of investing in gold coins. This coin is available at a minimum of 1 gm. I think even 0.5 gm coins are also available. This is considered one of good ways to physically store and invest in gold. However there exist risk of theft.
2.]Another way in which people can invest is through buying digital gold. This can be bought through G-pay, Phone-pe, etc. People can type 'gold locker' in the search section of G-pay to buy digital gold. For Phone-pe I hope it would be under 'wealth ' section, I'm not sure as I don't use Phone-pe. Using digital gold people can invest even from Rs. 100.
Now people might have doubt whether digital gold is safe or not. These apps claim that they have signed a deal with MMTC-PAMP for doing this. Once you require physical delivery you will receive gold in coins or bars as per the quantity you have bought. If you donot require physical delivery, you can sell those gold and receive the amount in your bank account.
If a person buys digital gold, the amount of gold equal to purchase value is kept in the name of purchaser. So according to gold price fluctuations, the gold kept digitally will also move. So there is no need to worry about appreciation of price. Further, there is no risk of theft as it is stored digitally.
I have never invested in digital gold. So I cannot suggest it to anyone.
3.] The third way is using gold etfs. These can be bought only using your trading and demat accounts. This will be more safer than digital gold. Here there is no GST levied for purchase. Here also the gold is stored with the Asset Management Company with respect to the amount invested. Approximately 100 gold etfs is equal to 1 gm with respect to quantity. These etfs could be bought at a very cheap rate, below 100 Rs.
4.] The fourth way is considered the best and more safest. This method is investing through Sovereign Gold Bonds [SGB]. These bonds a issued by RBI and could be bought from your trading and demat account. Each bond represents 1 gm of gold. Every year 2.5% interest is paid and repaid at the maturity at the prevailing market prices on the date of maturity. The maturity period is 8 years but we can also claim in 5 years by paying taxes.
Investing in SGBs is considered to be the most best way to invest in gold. The second most best way is to buy gold etfs.
Conclusion:
So gold is expected to rise. However last year gold has underperformed Nifty. But anyways from a long term perspective gold has outperformed even Nifty 50. Some donot advise to invest in gold as they take long time to rise.
I have shared these insights just for sharing knowledge. I have no intention to recommend you to invest. However I would like to say, even I have invested in gold. If you are willing to invest in gold, do your own research before investing.
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