Monday, 19 September 2016

3 Best Reasons To Invest in Gold Now

Posted by RaviKumar Nama
For many years, Gold is a good investment for Indians because of certain advantages with Gold investment. However, due to some reasons the Gold lost its sheen from the last 3 years. But the current global economic scenarios again encouraging to invest in Gold for hedging of your investments. Gold price forecast for the coming years is looking optimistic. The central banks are continuing to buy gold and are simply not selling. We will see what are these favorable scenarios for Gold investments. We will also see what are the various options available for an Investor to invest in Gold...

Why Gold is A Good Bet Now?

1. Nifty PE Ratio:

Markets are at their peak now. The PE Ratio of the Markets are reaching to 25 which is an alarming level for Market bearish in the coming days. If you see the following Nifty PE chart, it is clearly indicating that, the Nifty price movement is closely following the PE Ratio. If you see the chart, it reveals that when Nifty PE is between 12 - 15 range, then the Markets witnesses a sharp buy and when Nifty PE reaches 25, it witnesses a sharp sell off in the Market.And when Markets are in Sell zone, Gold is a best hedging investment. It is advised to decrease Equity portion in your Portfolios and fill it up with Gold for your long term investment. See the Below table for Nifty PE ratios and the corresponding Remarks.

2. Global Economic Uncertainties:

Recent updates happening in the world is encouraging for Gold investments. Political and Economic uncertainties in Europe, US and Middle-East, China's currency impacts, Brexit, Grexits, North Korea's Nuclear tests and Terrorism  are causing fear in the Markets. History reveals that Gold is a profitable investment when all other investments fail. Gold is a best hedging investment in a down economy. Gold is a best hedging investment during Global economic uncertainties. Because of its high liquidity, many countries and Banks invest in Gold as their hedging planning during economic uncertainties. This will create demand for Gold and the prices would go upwards.

3. Technical Analysis of Gold:

The Technical Analysis of Gold is clearly indicating that it is in Buy zone and will see north-ward journey in the coming days. For long term investors it is good time to invest in Gold. The Technical analysis indicators like RSI (Relative Strength Index) , Moving Averages, Candle-stick patterns clearly showing that the Gold is in upward journey and will continue in the coming days. We will discuss about Technical analysis and the Indicators in my next articles.

Gold Investment Options:

Now-a-days, there are many options available for Gold investments. Central Government recently introduced couple of Gold investment options to discourage traditional Gold investments. We will see what are the options available to invest in Gold:

1. Gold Monetization:

This scheme introduced by the Government of India offers investors the opportunity to monetize their gold stocks into an interest-earning asset. Under this scheme, gold is deposited into bank accounts just as cash is deposited in a Fixed Deposit. Gold jewelry and ornaments are melted and converted into bullion. The depositor earns interest on the original value of the deposit. So, if you deposit gold worth Rs. 5 lacs, you will earn interest on this amount irrespective of the current value of the gold. You can choose at the time of purchase to earn your interest in cash or as additions to the gold deposit. At redemption, the individual will receive the current market value of the original deposit along with the interest earned.

2. Gold ETFs

This is a favorite Gold investment option. A gold ETF is an exchange-traded fund (ETF) that aims to track the domestic physical gold price. Gold ETFs are units representing physical gold which may be in paper or in Demat form. One gold ETF unit is equal to 1 gram of gold and is backed by physical gold of very high purity. Gold ETFs are listed and traded on the National Stock Exchange of India (NSE) and Bombay Stock Exchange Ltd. (BSE) like a single stock of any company. Buying gold ETFs means you are purchasing gold in an electronic form. You can buy and sell gold ETFs just as you would trade in stocks. When you actually redeem gold ETF you don’t get physical gold but the cash equivalent. Trading of gold ETFs takes place through a de-materialized account (Demat) and a broker, which makes it an extremely convenient way of electronically investing in gold. You can even apply SIP approach to accumulate Gold units every month.

Top 5 gold ETFs in India:

  1. Goldman Sachs Gold BEes
  2. Reliance Gold ETF
  3. SBI Gold ETF
  4. HDFC Gold ETF
  5. UTI Gold ETF

3. Gold Savings Funds

Gold Savings Funds, also known as Funds of Funds are essentially mutual funds that invest in gold ETFs and other short term funds. However, buying Gold fund of fund is little expensive option, as you have to pay 1) Annual management charges for the underlying Gold ETF 2) Annual management charges of Gold FOF Scheme. Gold funds can also be bought online just like investing in other mutual funds online.

Top 3 Gold Saving Funds  in India:

  1. Reliance Gold Savings Fund
  2. SBI Gold Fund
  3. Kotak Gold Fund

4. Gold Accumulation Plan

A gold accumulation plan is a scheme that allows you to invest in gold through regular monthly installments. It enables you to accumulate physical gold over the tenure of the scheme ranging from 1 year to 15 years, with the minimum monthly subscription being as low as Rs. 1,000 per month.


Investing into Gold is a good hedging approach when the Markets are about to bearish or the Global economic uncertainties are prevailing. Irrespective of these factors, it is always better to include 10% of Gold into your portfolio for diversification.

1 comment:

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