Reasons To Invest In Gold

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  • 05 May 2023

This year’s budget brought good news for taxpayers, especially for those earning an income between INR 2.5-5 lakh per annum: the tax rate was brought down to 5% from 10%. This means individuals within this income bracket will now be able to save more money.

It’s easy to get confused when you have too many options to choose from in the investment market. Today, investors have too many options to choose from and it is easy to get confused about what to invest the extra income in. This is also in light of risky investments like stocks and bonds that are volatile. An easy alternative to market investments is one that has stood the test of time – gold. It is a valuable investment because it is safe and inversely correlated with traditional financial instruments. This means that when stock prices drop or collapse, gold prices soar. This has earned it the name ‘crisis commodity’ since gold not only retains its value during financial or geopolitical uncertainty, it often prospers. Reasons such as the ones mentioned above, and several more, make gold a necessary part of your investment portfolio.

Why Is Investing In Gold Is The Best Option For Your Tax Excess?


The value of gold has held its own over the course of history. We have seen an exponential 600% growth in gold price per gram in just between 2002-2017. This is due to the steady rise in the demand for gold all over the world, especially in countries like India and China, where it sees many uses other than jewellery. Thus, gold as an investment is attractive because of its profitability. This is one of the major reasons to invest in gold right now.

2. Versatility:

Contrary to popular belief, gold is not a rigid avenue of investment. In fact, its versatility is one of the biggest reasons to invest in it. There are multiple avenues in which you can channel your money while investing in gold, and each has its own unique characteristics.

Here are the most common options to choose from when investing in gold:

Gold jewellery: Golden ornaments have long been viewed only as an expense for adornment or a symbol of wealth, but they can be so much more than that in becoming a nifty addition to your investment portfolio.

Coins and gold bars: These are a more standardised form of gold investment as a commodity. One of the major reasons to invest in gold coins and bars is that while they retain the personal control and liquidity of jewellery, coins and bars come with official certificates of authenticity and purity, ensuring a safe and secure investment transaction and trade.

Gold ETFs: A Gold Exchange Traded Fund (ETF) is a financial instrument that revolves around the fluctuations of gold prices. It acts like individual stocks and can be exchanged and traded in the same way as any other stock. The point to consider here is that while investing in an ETF you won't be investing in physical gold but will be backed by it. Thus, while redemption, you won’t receive any of the metal but the cash equivalent, as is the case for normal stocks.

Gold mutual funds: Gold mutual funds act as any regular stock investment instrument wherein you will invest in gold mines. This is a ‘high risk, high reward’ form of investment owing to its high possibility for fluctuation and other vulnerabilities. This option is open to all vulnerabilities in the stock market that gold investments are supposed to usually be safe from. However, if you can afford this risk, look forward to high-profit margins when the time is right.

Gold bonds: Sovereign gold bonds are gold-holding substitutes provided by the government. These can be bought on a gold price per gram basis issued by the Reserve Bank of India and can be redeemed upon maturity for cash equivalence.

Gold accumulation plan: This is a hybrid arrangement offered by banks and several private enterprises, where a cash amount is accumulated on the basis of regular premiums and is redeemed on maturity for either cash equivalence or physical gold.

3. Flexibility:

The flexibility of investing in gold ties in nicely with its versatility. Since you have so many methods to choose from, you can also freely choose what amount and at what intervals you want to invest. There are many different combinations of these two factors in the vast palette of gold investment to match every investor's needs. In relation to the different forms of investments mentioned above, we can see that each caters a different kind of investor needs.

Gold jewellery is personal property and a commodity that is regularly bought and sold for large sums. It makes an investment in jewellery a very lucrative choice if you are looking for liquidity on your own terms. Gold coins and bars are suitable for those who wish to only invest in gold commodities and not use it for any other purpose. Gold ETFs are for people who want to invest in gold without physically investing in it, while still maintaining the benefits of traditional stock investments. Gold bonds are not the most rewarding but are the most secure method of gold investment on the list. Gold accumulation plans are the most versatile form of gold investment suitable for even the most casual investors in form of a hedge fund or future security.

4. Liquidity:

Gold is traded in large quantities in multiple banks all year round, and in private agencies all around the globe, making it one of the most dynamic markets that seldom see any downtime. This active marketplace makes it very easy to liquidate any gold holdings at a moment’s notice without any unnecessary delay or formalities. This favourable liquidity of gold assets is one of the major reasons to invest in gold for investors.

The National Commodities & Derivatives Exchange Limited (NCDEX) or the Multi Commodity Exchange of India Ltd. (MCX) are the places to redeem your gold ETFs, bonds and stock whenever required.

5. Beauty:

Gold, other than being a timeless investment, has also been a symbol of wealth and a status symbol right from feudal times to modern days. Even today, an investment in gold not only safeguards your wealth it also establishes it as a symbol of your success. This makes gold investments a way to bring beauty to the dull world of finance, not to mention the ornamental value gold possesses. Almost every Indian household invests in gold jewellery, with women sporting it at weddings, parties or wearing it casually on a daily basis.

Other than protecting your finances against inflation, gold, in the form of gift and jewellery also protects your position in society and makes for an important accessory in numerous occasions and events. And all of this together makes gold as an investment well-worth considering.

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