Is investment in Gold a good idea? Advantages and Disadvantages
 

Gold is a precious metal which attracts everyone. It is considered to be a symbol of good luck.

People prefer gold in two ways, one is for consumption purpose and another is for investment purpose. For consumption purposes like. on marriage, festivals etc.

Most prefer the gold for investment purposes. They invest in gold in order to earn profitable income. But the question: Is investment in gold a good idea?

Our profit in gold investment is based on gold amount and gold amount is decided on gold rate.

Gold rate is changing continuously; it may increase for some time which affects our profits.

But the fact to be considered is that every investment has a little bit of risk. There is no investment which has zero risk, so if you earn profit by way of investment you have to take risk.

It depends on you, whether you are ready to take higher risk or low risk.

The same is for gold investment. This investment has positives as well as negatives effects and by reading the following paragraphs, you can decide whether investment in gold is a good idea?

First of all, I will tell you what are advantages and disadvantages of investment in gold.

So let's start examining these:

     

    Advantages of Investment in Gold

     

    Easily conversion into cash

    Invest in Gold and hold it in your home or in a locker. In case of any emergency arises, you can sell this gold.

    Gold is such a matter that you easily find the buyer for your gold so it is very easy to convert to cash.

     

    Less risk

    Gold investing has very less risk as compared to other investments.

    You just have to invest in gold, keep them safe from theft etc. and sell when prices rise, so it is an easy procedure as well as less risk.

     

    Global demand

    Gold is a precious metal and demanded globally. Especially during festivals in India demand for gold increases and its price also increase.

     

    Start with small amount

    Gold investment is such investment which attracts many beginners.

    People, who are trying to invest as a beginner, can start with a small amount of investment.

    In this way they can gain knowledge for buying gold in future.

     

    Wealth Creations

    Once you invest in Gold like. Jewellery, it adds to your wealth. Jewellery can be passed to the next generation.

    So if you do not want to sell the gold investment, it keeps on account in your wealth.

     

    Disadvantage of Investment in Gold

    Now after examining the advantages of investment in gold let us have a look for disadvantages of investment in gold which make you able to decide whether investment in Gold is a good idea?

     

    No continuous income

    Investment in gold is a one-time investment. Once you invest in gold it creates your asset, but this asset does not continuously make profits.

    Once you sell the gold your investment is over, that sale may be profitable or not, so in this way, you do not get your money continuously increased just like other investment.

     

    Storage cost related to safety

    If you purchase gold one thing always hits your mind that is the safety of gold.

    What if it gets stolen, so there are security issues, and if you decide to keep them in a bank locker then it has its storage cost as well, which make your cost of investment higher.

     

    Making of Designing charges

    If you invest in jewellery then it has its making as well as designing changes, because jewellery not only contains gold but also other material like stone etc.

    while purchasing jewellery you not only pay for gold but you also pay for other making and designing charges.

    But the problem is that when you sell it, you will be paid for the price of gold in jewellery and not for making design charges which is a huge loss if you invest in jewellery.

    So instead of this it is better to invest in gold bricks and coins.

     

    Current prices

    The price of gold changes continuously on a daily basis so if you want to sell the gold you get the price of that particular selling day, which may give you profit or may give loss also.

    Till now you have taken knowledge about the advantages and disadvantages of gold investment.

    Now let have a look what are the factors which affect the gold price.

     

    Factor which affect the gold prices

     

    Demand and Supply

    The price of gold is measured by demand and supply, when the demand for gold increases its price increases because of scarce supply in the market.

     

    Monsoon effect

    The monsoon has its impact on the price of gold. During monsoon if the harvest is good then it generates huge income in rural areas, which increases the demand for gold and hence its price in case if supply is relatively less.

     

    Interest rates

    If commercial banks reduce the interest rate then many people can afford loans.

    In this way a huge amount of money flows into a market which increases earning capacity, and increases the price due to increase in demand.

     

    Festival seasons

    We mostly have seen that during festival season the price of gold rises. India is a country which is full of festivals during festivals.

    People demand more gold and want to invest and result is increase in the price of gold.

     

    International Gold prices

    The gold price of the country is also affected by the Global gold prices. If there is an increase in prices globally then prices also increase in our country.

     

    What are the types of gold investment?

    If you want to invest in Gold then there are various types in which you can invest:

     

    Physical gold

    In this investment you just have to purchase gold and keep it in your safe custody and when you feel that the price of gold increased then you can sell it.

    This method of investment is followed for many years. You can invest in physical gold in two ways:

     

    Buy gold jewellery

    Benefit: If you do not want to sell then you can use it in your home for casual purposes.

    Limitation: It carries making and designing charges which result in loss while selling.

     

    Buy gold bricks and coins

    Benefits: If you buy gold bricks and coins you do not bear the loss of making and designing charges.

    Limitations: Problem of storage.

     

    Digital Gold

    Because of the problem of storage, now there is an option of digital gold. You do not need to keep physical gold rather it keeps in digital form.

    So it is a very good investment for those who do not want to carry physical gold due to storage and safety issues.

     

    Gold ETF (Exchange Traded Fund)

    Gold ETF is the fund issued by banks connected with stock exchange, which collects the money from the public and invests in physical gold, gold mining companies.

    In this some portion funds are also invested in debt securities in order to maintain liquidity, so if you do not want to invest in physical gold then you can invest in Gold ETF, and your fund is regularised by portfolio managers, you just need to have a demat account for investment.

     

    Conclusions

    By reading this article you are able to decide whether investing in Gold is a good idea, this investment has its advantages and disadvantages. It has less risk from its perspective. There are various types of gold investment you can choose according to your requirement.


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