Gold gets bold: Exciting new ways to invest in gold

Globally, gold has been considered a must-have in your investment portfolio. Gold mitigates risk, diversifies your portfolio and offers you great liquidity.

It is for these reasons that gold as an investment is gaining popularity worldwide. Globally, investments in gold increased from USD 3,410 million in 2002 to USD 6,250 million in 2004 – some of them in physical form and some in paper. In India itself, investment in gold in the form of bars and coins almost doubled in the first quarter of 2005 to 189 tonnes as compared with the same period last year.

Consumption and Investment in India (in tonnes)

Today, gold forms 10% of average Indian asset allocation.

But, most of this gold is in the form of jewellery – something that is looked upon as a status symbol to be sold only in distress. Gold is not yet considered as a serious part of an investment portfolio. Jewellery by itself has a major drawback – there is a loss of around 30% due to making charges.

Then what would be the ideal way to invest in gold? Sanjeev Agarwal, Managing Director-Indian Sub Continent, World Gold Council (WGC)  suggests that physical gold can be bought from banks like ICICI Bank and HDFC Bank. The banks have started to sell 10 gm denominated gold coins. These coins are of 99.99% purity. If you sell these coins or bars in the market, you will get the full value of gold without any loss due to making or melting. Financial planners recommend a systematic investment in gold.

Certified Financial Planner Gaurav Mashruwala and his wife Pranati did exactly that. They have been buying 100 grams of physical gold every year for the last 10 years. They make their purchase every Diwali. Over the last 10 years, they have managed a return of 8.5% per annum.