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The Ultimate Guide on How to Start Gold Investing

August 4, 2023

Table of Contents

    Table of Contents

      Dive into the world of gold investing and understand the pros, cons and strategies for different gold investment plans with this beginners guide!

      Investing your money as a beginner can be overwhelming, especially with the abundance of investment opportunities available nowadays.

      As a newbie in the investment world, if you are looking for a secure and potentially rewarding asset, then gold investing is your shining beacon.

      A time-tested safe-haven investment, gold has long been loved for its intrinsic value and resilience against economic uncertainties. 

      In this guide, we will delve into the reasons why gold is a wise investment choice, exploring its benefits as a hedge against inflation and a global currency, how it aids in diversifying risks and more.

      Later, we'll unveil five essential ways to invest in gold, including physical gold, gold ETFs, gold mutual funds, sovereign gold bonds (SGBs), and digital gold.

      We'll also conduct a thorough comparison to help you determine the best form of buying gold that suits your investment goals.

      Lastly, we'll equip you with five golden strategies to navigate your gold investing journey with confidence.

      So, prepare to immerse yourself in the glimmering world of gold investing and unveil the secrets to securing your financial future.

      Why is Gold a Good Investment?

      Before we dive into the ways to invest in gold, let’s first answer a key question: Is it profitable to invest in gold? Here are five reasons why gold investing is always a good idea: 

      Hedge Against Inflation

      When we take a look at historical data, gold investing has always been considered a hedge against inflation because its value tends to increase during times of high inflation. As inflation is currently high, buying gold is a good option for investors looking to protect their wealth against inflationary pressures. 

      Risk Diversification

      Gold has a low correlation with other asset classes like stocks and bonds. Including gold stock in a diversified investment portfolio can reduce overall risk and volatility.

      Store of Value

      Gold has been valued as a precious metal for centuries, prized for its rarity and allure. Unlike paper assets that can be vulnerable to economic downturns, gold retains its intrinsic value over time. It can act as a long-term store of value, protecting your wealth against economic uncertainties.

      Global Currency

      Gold holds universal value and is recognised as a form of currency worldwide. Because of this, It is not subject to the same volatility and uncertainties that can affect traditional currencies. Gold can be a safe and stable store of value, especially during times of economic instability or geopolitical turmoil.

      Limited Supply 

      As gold is a finite asset with a finite supply, its scarcity adds to its value over time. Additionally, gold demand is driven by various factors, including jewellery, industrial uses, central bank reserves, and investment purposes. The combination of limited supply and consistent demand can contribute to potential price appreciation.

      While gold has historically shown stability and potential for growth, like any investment, its value can fluctuate. Ifyou are convinced that investing in gold is a good investment, let’s dive into 5 ways of gold investing to get you started! 

      5 Ways of Gold Investing You Have to Know

      Physical Gold 

      Physical gold is a tangible asset that can be further broken down into gold coins, bars, gold bullion and jewellery. 

      • Gold Coins:

      Gold coins are small, minted pieces of gold, often produced by government mints or private institutions.

      They come in various denominations and typically carry a certain level of purity, expressed as a percentage or karat.

      Buying gold coins is a popular choice among investors and collectors due to their small size, portability, and ease of storage. 

      • Gold Bars:

      Gold bars, also known as gold ingots or gold bullion bars, are larger and heavier pieces of gold that are produced by reputable refineries and come in various weights, ranging from a few grams to kilograms.

      Gold bars have higher gold content and purity compared to coins, making them a more cost-effective way to buy and store gold in larger quantities.

      They are favoured by institutional investors and central banks for their high value and ease of handling.

      • Gold Bullion:

      Gold bullion refers to gold that is in its raw, pure, and unprocessed form.

      It is typically 24-karat gold, meaning it contains 99.9% pure gold. Gold bullion is not shaped into specific coins or bars but is sold in bulk quantities based on its weight and purity.

      Investing in gold bullion involves buying raw gold directly from reputable dealers or authorised institutions.

      • Gold Jewellery:

      In India, gold investing most often takes the shape of gold jewellery including various ornaments, such as necklaces, bracelets, rings, earrings, and more. While gold jewellery is primarily worn for adornment purposes, it also serves as a great investment option.

      However, it's important to note that the value of gold jewellery may not be purely based on its gold content, as craftsmanship and design also play a role in determining its overall worth. 

      Gold ETFs

      Gold ETFs are investment funds that trade on gold stock exchanges like individual stocks.

      They represent ownership of physical gold but do not involve holding the physical metal directly. Instead, ETFs are backed by gold reserves held by custodians.

      Investing in gold ETFs allows for easy buying and selling of gold without the need for physical storage, making them a convenient option for investors seeking exposure to gold's price movements.

      Gold Mutual Funds

      Gold mutual funds pool money from multiple investors to invest in a portfolio of gold-related assets, including physical gold, gold stocks, and gold-related securities.

      Managed by professional fund managers, these funds offer diversification of the investment portfolio.

      Buying gold online through gold mutual funds provides a more accessible and less risky option for investors compared to directly holding physical gold.

      Sovereign Gold Bonds (SGBs)

      Sovereign Gold Bonds are issued by the Government of India as a financial instrument to invest in gold.

      These gold bond investments are denominated in grams of gold and are linked to the prevailing market price of gold.

      SGBs offer investors an opportunity to earn interest and capital appreciation, making them an attractive alternative to physical gold ownership.

      Additionally, SGBs also come with certain tax benefits. 

      Digital Gold 

      The newest form of gold investing has taken a digital shape with digital gold platforms like Jar, Paytm, PhonePe and MMTC-PAMP allowing investors to buy and hold gold in a digital format.

      Investors can buy gold online in small denominations, and the gold is stored securely on their behalf.

      Digital gold platforms provide the convenience of owning and leasing gold without the hassle of physical storage and allow for easy buying and selling of gold in real time.

      Which Form of Buying Gold is Best? A Comparison 

      5 Golden Strategies to Help with Gold Investing

      Now that you know the different ways of gold investing and which may work better for you, let’s go through 5 golden strategies to help you with your journey. 

      Define Your Goals

      Similar to any investment journey, it is important to define your goals before you begin your gold investing journey.

      Are you looking to hedge against inflation, diversify your portfolio, or achieve long-term capital appreciation?

      Are you looking for quick, small returns, or are you comfortable with long-term investments? Understanding your objectives will guide your investment decisions and help you choose the most suitable form of gold investment plan.

      Set a Budget

      Determine how much you're willing to invest in gold, considering your overall financial situation and risk tolerance.

      Setting a budget will help you avoid overextending your resources and ensure a balanced portfolio.

      Stay Updated

      Keep yourself updated with the latest trends, market developments, and economic factors and different factors that affect gold rates.

      Global events, economic indicators, and geopolitical tensions can influence gold's value.

      Staying informed will enable you to make wise decisions and seize better investment opportunities.

      Consider Timing

      Like any investment, timing is key in gold investing.

      While it's difficult to predict market movements, keeping an eye on gold price trends and potential market entry points can help you make more favourable investment decisions.

      It's important to remember that gold is a long-term investment, and short-term fluctuations are common.

      Choose the Right Investment 

      Select the form of gold investment that aligns with your preferences and circumstances.

      Whether it's physical gold for tangibility, ETFs for convenience, or sovereign gold bonds for fixed interest, understanding each option's features will ensure your investment choice suits your needs.

      The Bottom Line

      Gold's intrinsic value, historical significance, and ability to weather economic storms make it a timeless asset that can play a pivotal role in securing your financial future.

      However, it is also important to understand the risks and realities that come with gold investing.

      By blending your unique aspirations with the insights shared in this guide, you're poised to navigate the complexities of gold investing with confidence and make decisions that align with your aspirations.

      As you tread the path of gold investment, may your journey be prosperous, enlightening, and, above all, golden!