How Indians Invest in Gold

By | August 10, 2015



For anyone in India, the single most important financial activity is making investments to safeguard the future. Traditionally, investing in fixed deposits has been a popular way of creating investments purely because they offer a safe environment for investments and steady growth. Other trends have seen investments in life insurance and mutual funds also rise in popularity but there is another form of invest that we have believed in for eons and that investment is gold. India has always had an affinity for gold which goes back thousands of years. In fact, until a couple of years ago, when China entered the running, India was the highest consumer of gold in the world. From stockpiling jewellery to literally making clothes out of it, India has proven that its appetite for gold is almost insatiable.

Why invest in gold?

There is no escaping the fact that gold is a very popular investment in India. One of the reasons is that gold has always been an important part of the culture of this country. Gold is considered a safe investment because its value not only increases over time but also holds up well during periods of economic uncertainty. It is easily saleable and unlike paper investments it is versatile in that it has many uses.

Investing in gold in India

  • Jewellery
    You could go the traditional way and buy masses of gold jewellery in order to invest your money in gold. You could buy the gold today and create a corpus of wealth to pass down to your children. This will also act as an emergency fund.
  • Invest in gold coins and bars
    Instead of buying gold from the market, you can approach a bank and buy gold coins. Gold coins from banks are 99.99% pure gold which often comes with an Assay Certification. This gold can be bought in multiples of various weights ranging from 0.5gm to 1 kg bars.
  • E-Gold
    E-Gold is another form of investing in gold where no physical gold is traded. It is also known as paper gold and can be traded on the National Spot Exchange. E-gold has been known to outperform gold ETFs. Investors can buy small quantities of gold which are sold for a profit when gold prices increase.
  • Equity based gold funds
    This investment is slightly different from investing directly in gold. Here you invest in companies that mine and market gold. This investment is considered a high-risk investment and is not recommended for all. Unlike other investments, your returns don’t come from the movement of the price of gold but from performance of the funds.

Once you have decided that you are going to invest in gold, the only question that remains is when? There is no definite answer to this question. The most pertinent advice is to invest for a long period of time as returns on gold are maximised only in the long-run. The best way to decide when to invest in gold is to study gold prices in India. Short-term dips in prices should not motivate you to buy gold. Look out for considerable drops in prices and the outlook for gold. This can be done by understanding the various factors that affect gold prices in India.


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