Gold is considered as an available asset in India, besides that it also serves as one of the finest investment options. Earlier it was only traded or bought as a tangible asset, but with advancement it can be bought over paper through gold exchange-traded funds, sovereign trade bonds issued by Reserve Bank of India and Gold Mutual Funds. Though it is true that every investment has its own risk which also includes gold.
Let’s glance at the risk associated with Gold Investment
When gold is bought in the form of jewellery, coins, bars etc., it should also be noted that the rate of the gold, GST and making charges are also charged from the individual which are irrecoverable. Other than the unrecoverable expenses, holding a valuable asset, especially gold increases the risk of theft, raises issues of purity and creates a problem of storage.
Gold Mutual Funds
It is suggested by the experts that Gold Mutual Funds are considerably a riskier option to invest in. This is because Gold Mutual Funds are backed up by real-time gold prices which are affected by the market uncertainty. Therefore, it is difficult to analyze whether it will give favorable results or not.
Sovereign Gold Bonds
Investment in Sovereign Mutual Funds can result in capital loss as it is directly linked to the international prices of gold. If the price at which investors bought the bond is higher than the price the investor redeemed the same bond, they might end up in a loss.
Gold Exchange Traded Funds
Gold Exchange Traded Funds can be more expensive than the physical gold itself as it has additional management fees attached to it plus also have other various risks associated. They can only be redeemed as cash and not gold as they are gold contracts and derivatives.
Despite all the risks mentioned above, experts still recommend investors to invest in gold because of its valuable nature. It is true that the gold metal provides a hedge against inflation and is capable of providing financial support during macroeconomic uncertainty.