INSUBCONTINENT EXCLUSIVE:
Authors: JordanPhysical gold is the gold you purchase in physical form.
Investors interested in gold are always on a lookout for best ways to maximise returns
While physical gold provides high liquidity, demat gold investment options such as gold ETFs (exchange-traded funds)and sovereign gold bonds
(SGBs) provide price consistency, say financial planners
Those looking to purchase gold often wonder about the good time to buy the yellow metal as well as the taxation polity on their investment
Experts suggest refraining from buying gold on the basis of sentiment alone
But first, let's learn more about the three basic ways of investing in gold: physical gold, gold ETFs and gold bonds
Be it jewellery or coins or any other form, physical gold is purchased in current gold price plus 'making charges'
This is the fee a jeweler 'charges' for providing the desired amount of gold in your preferred shape, a gold chain or ring for instance
It is primarily because of the 'making charge' that the price of physical gold varies from one jeweller to another.Gold ETF is like a mutual
fund, except that the money realized from a pool of investors goes only in gold
In other words, gold ETFs track physical gold price
Unlike physical gold, gold ETF units are determined in dematerialised or demat form
Gold ETF, therefore, requires a demat account
Also unlike physical gold, gold ETF price is consistent.Besides physical gold, investment in gold can be made in two more basic forms: gold
ETFs and gold bonds.SGBs pay interest on gold investments, payable every six months
The rate of interest is 2.5 per cent
Gold bonds or SGBs are purchased through authorised banks, non-banking finance companies (NBFCs)or stock exchanges.Here are five things you
must know before you put your money in gold:1
Physical vs demat goldInvestors preferring to purchase gold in physical form should look at minimising the making charges
Jewellers time and again offer discount on making charges, especially around the festival season, say experts
It is always best to check with a jeweller about making charges on different products
"Acquiregold either in demat form or in the form of gold coins if you are purchasing from physical market
An investor can also keep a small part of his investment to benefit from the fluctuations in gold prices by trading frequently in either
physical market or futures market," Gaurav Katariya, research head- commodities, Arihant Capital Markets, told TheIndianSubcontinent
Should you invest in goldGold has been a preferred choice for investors with a low- risk appetite to obtain safety
This is why gold and equities or equity-related asset classes have historically shown an inverse correlation, say experts
"Investment towards gold should not be on the basis of sentiment, but it must be ascertained according to financial objective and portfolio
That said, gold serves as a safe haven, especially during geopolitical events and domestic turmoil," Dinesh Rohira, founder and CEO,
5nance.com, told TheIndianSubcontinent.3
Key factors to watch out forCredit ratings agency CARE Ratings expects global gold prices to remain range-bound around $1,350 per ounce in
In the medium term, geopolitical tensions in West Asia, increasing US government debt and rising inflation pressures, volatility and lower
equity markets could support gold prices, the agency added."Looking at the overall geopolitical scenario and a fantastic performance in the
first quarter of 2018, it seems that the yellow metal will continue its north bound journey at least for next one-and-a-half year
Surely, one must invest in gold with a mid-term outlook say one-and-a-half to two years," Mr Katariya further said.4
Is this the right time to purchase goldMany experts advise use of gold as a hedge against volatility, uncertainty and inflation."After
remaining flat for over five years, it (gold) witnessed a positive momentum although it is partially driven by geopolitical concerns
Further, with a spike in inflation, gold provides a good hedge and this level can be seen as a good entry point to stay invested for a
duration of another five years," Mr Rohira of 5nance.com explained.5
Tax implication:The tax treatment for investment in physical gold or gold ETF is the same
Indexation benefit) after 3 years holding (or) Tax at slab rate before 3 yearsNo LTCG Tax on redemption; LTCG Tax 20% (With Indexation
benefit) after 3 years holding (or) Tax at slab rate before 3 years (AND) Interest Income Taxed at applicable slab rateLTCG Tax 20% (With
Indexation benefit) after 3 years holding (or) Tax at slab rate before 3 years"If SGB's are held till maturity there is no tax implication
All three forms of investment are able to avail indexation benefits for the computation of Long-term capital gain," Mr Agarwal added.
