How to Start Investing in Gold?

Any income that comes to your house has some preset expenses attached to it like paying for bills, food, clothes, fuel, fees etc. Every month the income comes at the beginning of the month and in about a day or two, a big part of it is already exhausted in paying for the EMIs and bills. The remaining portion of your salary is used for the rest of the month until this cycle starts all over again. One more thing to note is that the income that comes every month is constant with slight variations of some bonuses. So, the question that arises how can one handle the fluctuations that occur in the market or how is it possible to arrange for any new thing to buy?

Buying a car or any vehicle or buying a new house or least going for a basic renovation, all these are expenses that require a lump sum amount in hand, but, keeping in mind the basic monthly expenses and limited monthly income it can be inferred that not a lot is left out of the income. Regular saving in the kitchen shelves or under the mattresses is not going to suffice for these purposes. In reality, your savings from under the mattress are not even sufficient to help you in inflation. So, there has to be a way of saving that even multiplies itself. In fact, there are a lot of ways out there such as mutual funds, investing in shares, even money lending and earning through interest etc. and out of these ways, financial investment is one of the better tools and is very popular amongst today’s generation too. One can invest in stocks, bonds, funds, bank products, annuities and a lot more.

One of the main reason that you really need to invest your money is that without any of your efforts, you get more than what you invest i.e. your money grows while you don’t do any of the efforts. You just have to be wise enough for where to invest your money and then just wait for your investment boomerang to come back right into your hands along with benefits. The bare minimum effort you have to put while investing your money is to select wisely for where to invest your hard earned money and to help you out in that purpose, today, we are going to give you some in-depth knowledge of investing in gold.

Investment in Gold has really gained a spike in last five years or so and if certain mistakes are avoided one can save up to 10% on the actual gold price by investing in gold.  We will talk about all the basics of investment and gold investment and all the other relevant aspects in great detail in order to help you out in making a wise investment in gold. With this discussion, all we want is to help you in making an informed decision rather than making a vague one just for the sake of making the investment. So without any further ado, let us get right into the discussion.

What is actually Financial Investment?

In its most general form, one can define financial investment as the investing the money directly into the business instead of any other form of connection in the business. Other forms of involvement in a business can be being a co-operate partner for example. The only single objective with any financial investment is the financial return it gives you. All you want is your cash to grow and benefit you.

Why invest in Gold?

After you’ve made up your mind on doing some financial investment you might be having some question like why to invest in the gold? Or why does anyone invest in gold at all? These sorts of questions can be answered by a few reasons and one of the major amid them is that the gold prices are in fact positively affected by inflation with respect to the investors’ point of view. Inflation is an indication that you can get better returns out of your investment. One of the great examples is that gold rate in Kerala during last December was Rs.2786 and in July 2018 the gold rate in Kerala is Rs.2951. Although, this is not a long period to judge the performance of gold rates but here also you can notice an increase of Rs.200 in the price but the investments in gold are made for a longer period of about three to five years and for this much period, it is not quite possible to predict the market condition beforehand. By the way, these are the prices for a single gram for 24karat gold. Let us discuss more about gold investment in further sections below.

Ways to invest in gold

This is where your wisdom and investors’ minds come into play. There are a lot of ways to invest in gold in India and it depends on your choice of mode of investment for what returns you get on your investments. Below we have mentioned several ways of investing in gold starting from the physical gold options:

Gold Jewellery

This is one of the traditional ways of investing in old and has been in practice since ages. You just go to the jeweller and buy the jewellery. But you should hold yourself back from this option if you want some considerable amount of returns from your investment. Everybody knows that the cost of jewellery you buy include the making charges too which are not considered when you go in the market to sell your gold. Plus, when you are in the market to sell your gold, the prices offered are lesser than the actual gold price for that day. So, your total loss is the sum of the making charges and the price difference between the rate at which you bought the gold and one at which you sell it.

Gold Bars and Coins

When you want to invest in the physical gold, then Gold bars and coins are better alternates to the jewellery because they don’t carry any making charges. But here you have to decide where you’re going to buy the bars and coins. These are sold by either banks or jewellers. See, the choice is kind of easy as banks are only available when you want to buy the gold and they don’t buy it back while the jewellers provide you with both the services. You can buy and even sell the gold bars and coins back to the jeweller.

Equity-based Gold Funds

It is one of the indirect methods of investing in gold where your investment into this equity-based gold funds goes to companies which thereby invests your money in the companies which are connected to or are working on marketing, mining and extraction of the gold. The performance here depends upon factors like the fund house’ performance and the companies they are investing in, unlike the other options where the performance is directly dependent upon the gold prices in India.

Purchasing Gold mining stocks

Investing directly into the stocks of the gold mining companies is also one of the ways to invest in gold in India. If you are thinking how is investing in the gold mining company stocks is different from investing in stocks of any other company, then you should know that the stock prices of these companies are dependent upon the gold prices in India. But this is not the sole factor that affects the returns earned from these companies, there are other factors too like production costs, effective management, reserves, hedging activates and project development. There are over 300 gold mining companies that are listed under the gold mining sector of India.

Gold Exchange Traded Fund

If you are familiar with investing in mutual funds already, then this is nothing different for you as Gold Exchange Trade funds (ETFs) are nothing but mutual funds which invests your money gold and some of the units of these MFs are also listed in stock exchange. You can buy the gold ETFs from the stock exchange and for that, you’ve got to open a DEMAT account and trading account followed by paying for the fees for selling and purchasing them which is called brokerage fee which is usually around 0.25%-0.5% of the price of gold ETF.

Some of the popular gold ETFs in India is Birla Sun Life Gold ETF, IDBI Gold ETF and UTI Gold ETF and from our gold rates in Kerala example from the first half of the article, we can see that gold ETFs are one of the better ways to invest in India.

Gold Funds of Funds

What gold fund of the fund does is that it invests in the gold ETFs on behalf of you and you don’t require to open a DEMAT account. There are two charges that come along with the gold fund of the fund which are the annual management charges for the ETF and annual charges of gold FOF scheme.

One advantage of not buying physical gold and going for the other options is that you tend to be safe from getting your gold stolen or damaged.

Gold Hallmarks in India

If you choose to invest in physical gold in India, then it will best and safest for you if you buy the hallmarked gold as its authenticity is ensured by the hallmarking agency and you get a peace of mind that the gold you have bought from your investment money is essayed and cent per cent genuine.

Hallmarking is necessary because the Standard Certified Bureau assures the purity of gold and also provides a measure for its purity.

Now, how you can check if the gold you are buying is hallmarked or not? Well, you just have to search for the logo of hallmarking which is usually present on the underside or the back side of the gold.

Taxes imposable on Gold

Your gold investments are not exempted from the taxes and there are taxes imposed on investing in gold and the exact details are mentioned further in the section.

For the gold investments above Rs.30 Lakh, a wealth tax is imposed every year. The evaluation of the investments is done as on 30 March 2017 and tax amount is equal to one per cent of your investment amount and failure to pay this tax can even result in the seizure of your investment.

A capital tax of 20% is imposed on Gold ETFs and physical gold and if you sell your ETFs or physical gold after a period of 3 years, long-term capital gains are also imposable.

What is the right time to invest in Gold?

After all the research work will be done by you, there will only be one question that will leave unanswered which is when the right time to invest in gold is? Or when do the gold investments offers best returns? Actually, there is no right time to invest in gold and a reason to this is that you invest for a very long period in gold i.e. for around 3 to 5 years and in this long duration a lot of changes occur in the market and one cannot predict the market conditions after five years from now. from our example of gold rate in Kerala where we just took the time period of around six to seven months and in those months, a price rise of Rs.200 was observed but in reality, it is not guaranteed that this value will only increase in the future and there are equal chances of it increasing to the chances of it decreasing and thus, investing into gold is a game of time and patience.


So, we have reached the end of this long and detailed discussion where we talked about everything from the basics of investing in gold to discussing the advantages and disadvantages of investing in gold via different methods to even the taxes that are imposable on the gold investment. We hope that you got a lot of your doubts resolved or you might have got to know something more about investing in gold. The only message we would like to take you from this discussion is that investments are subject to market risk and thus, do your homework of researching about every aspect carefully before making up your mind.