Coins, jewellery, futures or funds? How to buy gold in a rising market
At a time when gold prices are climbing new records, investors may be confused as to which would be the best way to invest in the yellow metal - bricks, coins, jewellery, exchange traded funds (ETFs) or gold futures.business Updated: Sep 12, 2012 21:14 IST
At a time when gold prices are climbing new records, investors may be confused as to which would be the best way to invest in the yellow metal - bricks, coins, jewellery, exchange traded funds (ETFs) or gold futures.
Indians have been traditional buyers of physical gold especially jewellery, coins and bricks. Analysts say investors could explore ETFs or gold futures apart from buying physical gold.
"An investor must have 5% of their net worth at all times invested in physical gold preferably gold bricks or gold coins, as it is the only bet in case of a contingency like a civil war," said Vir Sardesai, financial planner, Sardesai Finance.
"However, investors can explore ETFs beyond 5%, as unlike physical gold, it does not attract capital gain tax."
ETF essentially is a security equivalent to a stock which has gold behind it, which means the companies own physical gold against every unit of ETF.
Industry experts say that retail investors must prefer coins and bricks to jewellery when investing for the purpose of investment as jewellery also includes cost of the designing and labour.
For physical gold, there could also be a risk and cost for holding it, which may not be the case for gold futures.
Investors can opt for gold derivatives or futures that are traded on the commodity exchanges.
"Gold futures can be very risky due to the volatility in the market and retail investors can choose between physical gold and ETFs," said Hitesh Jain, commodity analyst, IIFL.
"As prices have already moved up on expectations of fiscal measures in Europe and the US, these two instruments could yield best returns."
Analysts say investors could also look at investing in a gold company's shares on the stock exchanges. But this would be linked to the company's performance than the prices of gold.
Prices for spot gold were Rs. 32,480 per 10 grams in New Delhi, while price for October futures on the Multi Commodity Exchange were Rs. 32,048 for 10 grams.