With the price of gold falling and other parameters that will push the gold rate up, it may be a good time to invest in gold.
Why it may be good time to invest?
- When price of a commodity/stock dips, it is good time to enter market because you get the prospect of selling at higher price.
- Gold will soon find a technical support after which brokers/traders will not see stop loss hit. Manual or automatic trading may see less selling of gold.
- With major Indian festival seasons looming around the corner, demand for gold and thus price of gold is likely to rise.
- With the devaluation of INR, price of gold will increase for Indian consumers.
- Read my article on 4 Reasons Why Gold Price is Falling and that will depict that gold is not falling for any fundamental cause so it should bounce back.
How to invest?
Consider bullion bar, coins or raw piece of gold. Of these, the cheapest would be to buy a raw piece (lump) of gold because that will attract lowest making-charges. However, buying bullion bar may be standardized and less likely to be counterfeit. It may not be worthwhile to buy gold in jewelery/ornamental form for the following two reasons:
- people tend not to sell ornaments unless it is real emergency,
- making-charges on jewellery is higher than other form.
Gold Equity Traded Fund (ETF)
An organization that sells Gold ETF buys gold in large quantity and stores it in their vaults. They then sell the value of gold in paper/share form to investors. With the rise and fall in price of gold, the value of gold stored and thus the share price of gold with investors rises and falls.
- Investor need not make an effort to go to market and physically buy gold. Investor can buy and sell in the comfort of his home by online trading.
- Smaller amount of gold can be bought.
- Investor need not be worried about the security/insurance of the gold. This aspect is particularly important when buying large amount of gold.
- Despite any assurance from regulator there is still a risk of buying gold in paper form if the organization commits fraud.
While it may be good time to invest but be prudent on how much you invest in gold. If investment in any particular investment category is more than 5% then you are not being prudent.