The main advantage of buying gold jewellery is that you can wear it and enjoy your wealth.
It acquires great monetary value and at the same time attains the status of heritage as it passes down generations.
If you are specially buying jewellery for investment purposes, then you can select a piece that contains a higher percentage of pure gold. The higher the karat, the more is the content of gold. So, it is ideal to choose 24 karat or pure gold or 22 karat that is, around 91% gold, if you want to profit from investment in gold jewellery.
Though yellow gold is popular, you can get exquisite designs even in white and rose gold. Designer gold jewellery can be a great option in this regard.
Gold Bullion Bars: Gold bullion bars are most often bought in the form of gold bullion and can be purchased from any certified gold dealer. Some of the advantages of buying gold bullion bars are:
Bars are the easiest form to measure your gold.
They come in many different shapes and sizes to meet the needs of different investors.
This form of gold investment is very good for corporates and people contemplating to make large investments in gold.
Most gold bars consist of pure gold meaning they are 24K in quality.
If you are investing a large sum of money into gold bullion bars, it is better to buy one large bar than several small ones. Manufacturers add production costs to the market price of the bars which they sell. So if you buy fewer bars you save on these costs.
Gold Bullion Coins: As compared to jewellery and gold bullion bars, gold bullion coins are more convenient to own in terms of portability, ease of storage and size. Particularly, for the small investor, investing in gold bullion coins is the ideal choice. There are a variety of sizes that can be purchased from any reputed gold dealer. Make sure that you check the products’ certification indicating the quality. Also ensure that it comes in a tamper-proof pack to prevent any kind of damages to the product.
Disadvantages of buying jewellery, bars or coins
Physical jewellery and gold bullion bars attract wealth tax.
Although gold does not tarnish, it is a relatively soft metal. It may show signs of wear after time especially if you are buying items like bangles and rings which accidentally get knocked against hard surfaces.
There is lot of wastage if the designs are intricate, so indirectly you are paying a price for that too in the form of making charges. Making charges vary according to the design but on an average the more elaborate the piece, the higher are the making charges. As an investor you may never be able to recover that cost if you decide to sell that jewellery.
The purity of gold used in making jewellery is still a matter of concern. Though this problem has subsided due to hallmarking, it has not been completely solved.
Most jewellers make some deductions from the value of gold if you try to sell them jewellery that has been bought from some other jeweller.
In India, in most families, gold jewellery is bought with a lot of emotions attached to it and is the last thing to leave our house in terms of financial difficulties or even to gain from a favourable price rise. This negates the entire purpose of gold bought for investment purposes.
The storage of physical gold is a matter of great concern. Storing gold in large quantities is relatively risky and expensive compared to other forms of investments. There is always the constant fear of loss and theft.
Investment in gold does not provide any current and regular income like dividends or rentals as is the case with shares and real estate where investors can reap the benefits of their investment without selling their assets.
Investing in gold does not provide any tax benefit compared to other tax saving instruments available in the market.
Liquidating gold bullion bars may be tough because of their sheer value. Bullion bars may not be convenient for small transactions as the minimum investment is higher than a common investor can think of.
Gold ETF: A smart option available now is to buy Gold Exchange Traded Funds (ETFs). It is like buying gold in an electronic form. This Fund is traded like stocks or shares on stock exchanges. You buy them just like you buy other stocks from your broker. Each gold ETF unit is approximately equal to the price of one gram of gold. In due course, you can build up your gold portfolio in the same manner you would buy physical gold. You can invest in small chunks and build up a sizeable amount. Investing in Gold ETFs has many plus points. Here is why…
Your gold is in Demat form. So you do not have apprehensions about its safety. There are no constant fears about its theft.
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