3 Reasons why Gold Investment is a smart investment

Why is gold considered a safe investment in uncertain economic times?

In times of economic uncertainty, gold is considered a safe investment because it preserves wealth and maintains its value even as paper currencies lose purchasing power. Historically, the yellow metal has served as a hedge against inflation and economic instability, with its prices often rising during volatile markets. The tangible nature of gold and its universal value make it a reliable store of wealth and a trusted asset during times of financial uncertainty.

Can gold act as a hedge against inflation and currency depreciation?

Yes. When inflation rises and the value of currency depreciates, gold acts as a hedge against such situations. Its value tends to increase as the purchasing power of money declines, helping investors preserve their wealth. Unlike paper currency, gold has intrinsic value and maintains its stability during economic uncertainty, making it a trustworthy asset to counter inflation and currency depreciation.

What are the tax implications of investing in gold in India?

In India, gold investments are subject to capital gains tax. If an individual sells physical gold, ETFs, or gold mutual funds within 3 years of purchase, the gains are treated as short-term capital gains and taxed according to their income tax slab. If the asset is held for more than three years, it qualifies as long-term capital gains, taxed at 20% with indexation benefits. Additionally, 3% GST applies when buying physical gold.

What are the different ways to invest in gold (jewellery, coins, ETFs, sovereign gold bonds)?

There are several ways to invest in gold in India. An individual may buy physical gold in the form of jewellery, coins or bars, which offers tangible ownership of the asset. As a safer, more convenient option, individuals may choose to invest in gold ETFs or gold mutual funds, which track gold prices electronically. Another popular option is Sovereign Gold Bonds (SGBs), issued by the Reserve Bank of India (RBI), which offer interest and potential price appreciation.

What is the minimum amount needed to start investing in gold?

The minimum amount needed to start investing in gold depends on the type of investment one opts for. For physical gold, one may begin with as little as 1 gram, based on the current market price. Gold ETFs allow investors to invest in a fraction of a gram, making them more attractive and affordable. Sovereign gold bonds have a minimum investment of 1 gram of gold, making gold investment accessible for all types of investors.

What are the risks associated with investing in gold?

While gold is considered a safe asset, it is practical to be aware of certain factors. Gold prices can fluctuate based on global trends and economic conditions. Physical gold requires safe storage and may include making or wastage charges when bought in the form of a jewellery piece. Also, since gold does not yield regular income, it is best viewed as a long-term investment asset for wealth generation rather than a short-term gain option.