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This article is more than 1 year old.

Indians wake up to electronic gold investment but physical gold still plays first fiddle

Mini

As gold prices hit all-time highs for a second straight week, it’s worth pondering whether Indians should relook the way they invest in the yellow metal. It is estimated that Indian households have accumulated more than 25,000 tons of gold over the years, and this does not include the deep coffers of the temple trusts.

Indians wake up to electronic gold investment but physical gold still plays first fiddle
As gold prices hit all-time highs for a second straight week, it’s worth pondering whether Indians should relook the way they invest in the yellow metal. It is estimated that Indian households have accumulated more than 25,000 tons of gold over the years, and this does not include the deep coffers of the temple trusts. The country after holding the first place for many years in the global market is now the second-largest consumer of gold after China.
India sees gold as wealth, status symbol, and ornament. Gold reinforces the closeness of relationships, has a high emotional quotient and cultural significance among buyers. Most Indians buy gold as jewelry, bars, and coins. And on all these purchases you pay making charges, a brand premium – which is irrevocable at the time of resale. About 49 percent of global gold is used to make jewelry.
The reason individuals go for physical gold as there is no involvement of broker, no contract, you don’t have to disclose your buying and holdings.
As financial professionals debate on how gold bought this way isn’t an investment, Indians have been smart to use this gold while buying a new house, for wedding expenditure, for education and to pay off loans. Rural India also saves in the form of gold and silver and use it at a time of need.
Electronic gold investment picks up
India also has been quick to adapt to the financial instruments for including gold in its investment portfolio. There are changes evident in India’s $34 billion gold industry. The Gold ETF and Sovereign Gold Bonds have seen record response from investors amid lockdown.
The Gold ETF‘s have seen purchases worth Rs 3,500 crore, while the Gold SGB buying has been to the tune of Rs 5,000 crore in 2020. The cost of owning gold this way is much lower as there is no entry cost in SGB and it also gives 2.5 percent interest on your investment. These are the easiest and safest ways to invest in gold.
Gold does not give dividends and hasn’t given the best of gains in many years as compared to other asset classes but has proved itself in a tough time of uncertainty as we see now.
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