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Take the SIP route to invest in Gold


Gold always glitters irrespective of its price levels. After a dip in gold prices, it has once again begun to look up now.

In India, gold prices depend on three factors. They are the demand- supply situation, global economic outlook and the foreign exchange rates.

In 2012, gold prices soared to Rs 3100 per gram in India as the rupee depreciated sharply against the dollar.

However, the high cost of gold has not deterred the demand for the yellow metal, as there are not too many investment options, which act as a good hedge against rising inflation. Hence you have hold at least 10% of your portfolio in gold investments.

The more important question, however, is which is the best form of investing in gold?

Go for Virtual Gold

Gold jewellery cannot be considered as an investment. It has a certain emotional quotient and people seldom sell jewellery to earn a return on their investment. Alternatively, you can consider coins and bars but they too come with certain disadvantages.

Coins and bars require storage, which comes at an extra cost. There is also a cause of concern because of theft and loss of gold. Lastly, physical gold runs the risk of impurity unless you buy it from a reputed jeweller or a bank. There is no impurity risk involved in gold ETF. You just need to open a demat account for buying Gold ETF.

Gold ETFs invest in 99.5 per cent purity gold and you have the option of buying small units of gold ETF. In terms of value, one unit equals 1 gram of physical gold. These ETFs are listed and traded on stock exchanges like any scrip of the company. This makes it very convenient to buy and sell ETF unlike physical gold.

Although Gold ETFs charge an annual fee, they are more tax efficient than physical gold, as they don’t get added to the taxable wealth of the investor.

Take the SIP Route

If you don’t have any allocation in gold, then you should build it over a period of time.
For this, you can enter the market through SIP route. This will lower the average purchase price of investment.

For example, if you had bought 2 grams of gold per month from 1991-2011, you would have accumulated around 504 grams of gold by investing around Rs 3.9 lakh. But the value of the accumulated gold holdings is around Rs 13.30 lakh at prevailing price.

Apart from benefiting from lower average price, you will not encounter any cash flow issues if you invest in gold in a staggered manner.