Undoubtedly, gold is the metal that shows the prosperity and wealth of a person. And thus, it has always played an important role in the economy of every country. Even though gold is not used as a currency anymore, it is globally accepted as a prized possession. This is the reason why investing in gold is recommended. There are various reasons to invest in gold and the gist of all of these reasons is getting a good return while selling it off.
The rates of gold have mostly appreciated and recently, in 2016, the gold price rose majorly. However, the initial six months of the year 2018 have also been good in India, especially in the financial capital of the country – Mumbai. Currently, the gold rate in Mumbai is Rs.32, 363.60 for 10 grams. If this trend continues, the return on gold is not going to decrease even this year.
Best Time to Invest in Gold:
Gold investors and experts in gold investments recommend investing in gold when there are chances of inflation. When you find out that your national currency is going to drop, it is the best time to purchase gold. Additionally, if you want to keep some gold on one side, buy gold when dollar rates are at the highest.
One must keep his/her investment portfolio diversified, and thus, can choose gold as one option of investment. It is because gold is considered to be one of the safest ways to invest. However, in current times, people have various different myths about gold investment methods. Therefore, before understanding the benefits of investing in gold, let us learn about the top myths that people have regarding gold investments:
- Physical Gold is not Considered as Money: These days, people consider physical gold as a mode to transfer sentiments and a metal to showcase fashion. However, the ritual of giving gold to your loved ones has a hidden meaning of safeguarding him/her against financial crisis. By selling gold jewelry for money, one can get financial help at the time of need. Therefore, it is not right to say that you cannot use your gold as money in current times.
- Gold Investment is not as Fruitful as Other Investment Options: These days, people underrate gold investments and prefer other investment options. However, gold is one of those investments that perform well when other investments take a back-seat due to poor performance of the stock market. It is because gold holds a value in every bad situation. Moreover, to diversify your investments, investing in gold is suggested by experts.
- Physical Gold is not a Good Investment Option: Physical gold, like gold bars, jewelry, and coins, have safety threats. However, keeping these gold forms in your bank’s locker is the safest way to keep these things away from the threat of theft. But, banks charge a fee to safeguard your assets in its locker. Therefore, people think that it is not good to purchase physical gold, which is not true. For some reasons, if there is some crisis like war or a sudden decrease in the currency, for those times, physical gold has more value than anything else.
- There are only a Few Investment Options in Gold: Generally, people think that there are only a few investment options available in gold like physical gold and gold mutual funds, which is not true. You can get gold certificates, gold exchange-traded funds (ETFs), e-gold or digital gold, etc.
These were some of the myths of current time, due to which people avoid investing in gold. These myths must be busted so that people can make intelligent decisions for their investments. Let us now discuss the advantages of investing in gold:
Top Reasons to Invest in Gold:
- Gold as a Fence Against Critical Situations: This benefit comes under gold as a hedge category. A hedge is an investment that safeguards the investor against other losses. The price of gold rises when the cost of living increases and hence it proves as a hedge against inflation. According to some researches by Trinity College, it is found that gold works as the best fence when the stock market crashes.
- Gold Works as a Safe Haven: By safe haven, we mean that gold saves its investors against any possible catastrophic situation. This is the reason why many investors purchased gold after the financial crisis of 2008. It is because, even after this crisis, the price of gold kept on increasing and today the gold rate in Mumbai is Rs.32, 363.60 for every 10 grams. We can even say that the rate of gold has almost doubled in the past one decade.
- Invest Directly in Gold: It is seen that many investors take a lot of advantage of the tremendous increase in gold price. Additionally, many of the investors buy gold as a direct investment to provide an advantage when its price increases in the future. In this way, gold is being held by various wealthy individuals as a direct investment.
- Internationally Accepted Metal: Whether you are in the eastern part of the world or in the western one, gold is valued everywhere. You can get paid against your gold at almost all parts of the world. Albeit, the rate of gold may vary, but it is sure not regarded as a ‘useless metal’ anywhere across the globe.
- Invest in Gold Derivatives: Purchasing physical gold in the form of coins, bars, and jewelry is not the only option. There are various other derivatives of gold investment available in the market and you can select one according to your need. Generally, every physical gold item is difficult to keep at home as it has high chances of being stolen. However, if you put your money in gold mutual funds, gold ETFs, or gold certificates, you can safeguard your hard-earned money. Therefore, there are various derivatives of gold other than physical gold to invest in.
- Gold is Gaining its Lost Historic Status: There were times, when India was regarded as a golden bird, but with time, due to various reasons, this status diminished. However, people are yet again understanding the importance of gold investment and hence gold has started regaining its lost status and historic significance.
- Holds Good Price when the Local Currency Falls: Whenever the currency loses its value, the price of the gold increases. This gives gold investors a chance to gain more by selling old gold items in such situations.
- The Purchasing Power of Gold Increases with Deflation: When the situation of deflation occurs in a country, the prices of almost all the commodities decrease. Moreover, various business activities also take a back-seat in deflation. In such scenarios, one can purchase gold at comparatively low rates. And hence, the purchasing power of gold automatically improves.
- Supply Constraint: Since 1990, most of the supplies of gold come in the form of gold bullions issued by the central bank. However, a constant decline in this supply is also being noticed for quite a long time. Moreover, the supply from gold mining has also decreased in past few years. Less supply but constant or increased demand increases the rate of a commodity. And the same is happening with gold.
- A Commodity for Geopolitical Uncertainties: When geopolitical uncertainties arise, the price of gold mostly increases. In this way, gold becomes one of those commodities that can earn more in such situations.
In this way, it is always good to add gold investment in your financial portfolio, especially when your country’s currency has been seeing a downfall for some time. It is always good to diversify your portfolio and invest in gold as it minimizes the risks one can encounter with his/her investments.
However, before investing in any form of gold, such as gold bars, coins, jewelry, ETFs, etc., it is suggested to check the price of gold first. For example, the current rate of gold in Mumbai is Rs.32, 363.60 for every 10 grams. But, it is always suggested by experts in gold investments to not to put your entire money in gold or major share of your investment in it. You can keep gold as one of the safer, but lighter options to invest in.
So, the bottom line is there are a lot many advantages in investing in gold, but be wise while putting your hard-earned money in any investment. Gold always gives you something, but be smart while putting your money in it.
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