Team-BHP - Gold price at all time high of Rs 82,080/10gm | Is it safe to make fresh investments in gold today?

I am curious to see which would do better in long term. Physical gold (coins and bars) or Index funds? I have a sizeable investment in Physical Gold in Apr 2024. It was around 72-74K at that time. To avoid SCTG, I will be selling this around Apr 2026, which will also help me clear my home loan at the earliest.

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Originally Posted by GTO (Post 5916196)

Gold is a fantastic investment. Appreciates, easily sell-able, easily exchangeable, easily transferable to jewellery, easy to store, available via RBI sovereign bonds.

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Originally Posted by vaibhav_a_a (Post 5916221)

As long as governments world over pursue populist policies, run deficit budgets and print fiat currency with abandon gold will continue to run up.

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Originally Posted by thanixravindran (Post 5916320)

Also, I personally calculate the real money value with gold rates rather than WPI/CPI.

Gold is not an investment. Since old times It is a protection against instability - financial, economic, political, civil or any other. In modern times USD is another such tool.
As such if Gold or USD and especially if both are appreciating then underlying factors must be analysed carefully to look for the symptoms of the malaise. Also this appreciation will probably come along with commensurate inflation which will negate returns.

Uncertainty, volatility, global political tremors all raise the price of gold. Given that China and India have taken long term decisions to diversify their FX reserves outside the US$ into gold the demand for gold bars will remain consistently high for a long time. It is likely to rise over the next 10 to 15 years. At least that is my uneducated assessment. From circa 1988 I have bought small quantities of gold as my finances permitted. Then the price was ~Rs 3100/- {like Rs 36,000/- in today's rupees}. I stopped buying in 2010 as it was no longer needed for portfolio diversification. By then the price was ~Rs 18,000 {like Rs 42,000 in today's rupee}. For an individual gold is a safety investment, needed to some extent but not as a primary investment.

The total gold ever mined since the start of human civilization is estimated at 212,582 tonnes by the World Gold Council. That is a cube with sides of ~22 metres. That's all. Annual mining is around 3000 to 3600 tonnes per annum. Other than by Central Banks gold is needed increasingly for computers, aircraft engines, space craft, telecom equipment, pharmaceutical's, nanotechnology and such like uses. India & China remain the two largest gold importers who import for own use importing 25% and 8% respectively of global production.

China & India's policies on gold reserves and USA's weaponization of the $ will ensure price rise for several years.

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Originally Posted by Nanolover (Post 5916848)

I have kept investing ONLY in gold coins (22k) and gold bars (24k). The appreciation over the the past 2 years is just extra ordinary. Even when I started this just 10 years ago, gold was at 22,000 per 8 gm for 22 k coin. Now it's at 60k for the same coin- a 3 fold increase in price over 10 years.

We were able to double our money over 5 years and used it for my elder daughter's admission abroad. The top jewellery in Trivandrum takes the coins back at the days rate minus 1% and hands over the cheque, so the entire process is seamless and accounted for.

BUT--- due note, income tax department is not far away. Capital gains tax has to be filed for any gain on gold transaction and this takes a chunk of the speculative profit we made.

But even so, considering how our currency is in free fall, best option is to buy gold and you can immediately turn it into cash when the need arises and in whatever sums you need- sell one coin or 10 coins depending on your need. It's instant money at today's rates without the hassle of land sale / brokers etc.

The only caveat is that the price is now astronomical and to buy a coin itself means you need the better part of 60k!

Hi, if I am not wrong investing in Silver do not attract any Income Tax or Capital Gain Tax. Do check this and see how much Silver prices have gone up in last 5 to 10 years.

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Originally Posted by SmartCat (Post 5916790)

in 52 years works out to be 11.5% CAGR

That's a solid Return over a long term, and if you try mapping it for volatility or a 3 year / 5 year trailing returns , it will tell us about the stability to portfolio via diversification.

I have investing in gold mostly in physical form and more than me, it's my better half who is very happy :loveit

Here is something on a lighter note to support having gold in physical format (only as a joke):

Owning a Gold ETF is like saying you have a wife, but she lives in Nippon's apartment and Nippon sends you 1 picture of her every month end. rl:

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Originally Posted by GoBabyGo (Post 5917074)

Hi, if I am not wrong investing in Silver do not attract any Income Tax or Capital Gain Tax. Do check this and see how much Silver prices have gone up in last 5 to 10 years.

From where have you gleaned this gem of a factoid :D

Gold was always seen as safe investment and over the years have given good returns and last 10 years has seen significant bump in price. However one has to keep in mind as per legal rules, couple can hold upto only around 600-700 grams of gold. Gold comes under the purview of wealth tax too. Few other aspects to consider:

1. For ornaments there is considerable making charge/wastage levied along with GST. One has to account for these with the purchase price.

2. Many seller charge quite a good amount as stamping charges even for coins/bars irrespective of 22/24K.

While the returns have been good, for buying physical gold as investment - one has to account for tax, inconsistent purchase price, legal rules and lastly security!

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Originally Posted by vaibhav_a_a (Post 5917144)

Wealth tax was abolished in '16. So am curios to hear if it was re-introduced specifically for Gold? Is there a notification you can point to? Thanks in advance.

Sorry, you are right, wealth tax was abolished and there is no specific rules re-introduced for gold except for the limit aspect where one can hold upto certain limit of gold per individual and beyond which can be fined.

Since the prices have gone up so much, many jewelers have schemes to do a monthly SIP. You invest a specific sum every month and the equivalent grams of gold are virtually allotted to you at that days price. At the end of 11 months, you can exchange the virtual units accumulated with physical gold in any form.

With prices constantly trending up in general, it is useful for people who want to set aside some money every month towards a gold purchase and it helps lock the purchase at a set price every month.

Of course, it is more beneficial to the jewelers as they get the money and keep it locked for 11 months without physically giving you anything.

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Originally Posted by PrideRed (Post 5917162)

My understanding is that the limit is related to how much you can hold without additional tax scrutiny. There is no legal limit on how much gold you hold as long as you can explain the source for purchase in case of a tax question, it is ok.

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Originally Posted by PrideRed (Post 5917107)

However one has to keep in mind as per legal rules, couple can hold upto only around 600-700 grams of gold.

This isn't fully true.
If you have valid documentation, such as purchase receipts or proof of inheritance, you can keep more than the limit without facing penalties.

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Originally Posted by Rajeevraj (Post 5917203)

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Originally Posted by Cooltronics (Post 5917275)

This isn't fully true.
If you have valid documentation, such as purchase receipts or proof of inheritance, you can keep more than the limit without facing penalties.

Limit specified is somewhat the safe limit. Unless you have either purchased entire quantity with bill and declared source, anything else has an element of risk. Typical Indian household have gold obtained as gift, bought from store without bill, gold exchange etc. While one can justify, anything above limit better to have valid document for all that you own.

Again point I want to make is investing in physical gold has higher risk compared to ETF/SGB and better to avoid ornaments incase you are buying gold for purely investment.

M. Pattabhiraman from Freefincal has a very concise article on investing in Gold. It is a must read.

https://freefincal.com/five-facts-to...ore-investing/

To paraphrase the article.

Look at rolling returns of Gold instead of price at point X vs price at Point Y.
Gold is as volatile and risky as equity
Given its volatility, it cannot be a hedge.

I think it's a doomsday hedge. If the economy of India completely collapses along with the rupee, then it is a hedge. The probability of this is low.

In general, we should not get carried away by its performance over the last few years. If you must buy, I would strongly urge everyone to simply buy Gold ETF instead of physical gold. That's what I do. This completely de-risks a lot of things.

There is no security risk.
Selling is a click of a button and funds get deposited in your account right away.
Jewellery is for aesthetics. Selling it results in making charges getting deducted. Plus if you do not have the original bills, they will melt it down and validate before exchange. It's not transparent and simple. Most jewellers do not give cash, they will only exchange.

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Originally Posted by PrideRed (Post 5917293)

and better to avoid ornaments incase you are buying gold for purely investment.

This is a good point. Most of the gold purchases by a regular consumer will be in the form of ornaments which will incur making charges which will be lost when you try to sell the gold and this impacts the rate of return. Something that buyers who buy gold only for investment purpose need to keep in mind.