5 Reasons to buy gold from the money saved on tax

Investment | Market Commentary

The Union Budget 2017-18 gave all of India an immediate increase in take home salary of Rs. 12,500 with the tax rate being cut from 10% to 5% for those earning an annual income of between Rs. 2.5- Rs. 5 Lakhs. Here are 5 reasons why you should spend that money on gold.

 

Reason 1: Profitability

Despite changing times, gold’s historical growth and potential returns speak for themselves.

Rise in gold price over 15 years

  • 2002: Rs. 500 per gram (approximately)
  • 2017: Rs. 3000 per gram (approximately)

Return on investment

  • 6 times!

Potential return* on today's gold investment

  • 2017: Rs. 12,500
  • 2032: Rs. 75,000

*Considering it grows at the current CAGR that held true for the latest 15 year-period.

Reason 2: Versatility

Gold allows you to choose an investment avenue that is well-aligned with your risk appetite and financial goals. Here’s a look at the different ways you can invest, and the advantages of each.

  • Gold Jewellery – Ease of purchase and liquidity
  • Coins & Gold Bars – Flexibility in terms of investment amount and purchase intervals
  • Gold ETFs – Easy storage, high liquidity, and quality assurance
  • Gold MFs – Hassle-free process, and active portfolio management
  • Gold Bonds – Guaranteed rate of returns on investment and exemption from LTCG tax
  • Gold Accumulation plan – Systematic investment opportunity and flexibility of physical formats at redemption stage

Reason 3: Flexibility

You can start investing in gold with just a few thousand rupees. Here’s the minimum investment required across gold formats:

  • Gold ETFs – 0.5 grams
  • Gold Coins – 1 gram
  • Gold Jewellery – > 1 gram
  • Gold MFs – 0.16 grams* or Rs.500
  • Gold Bonds – 1 gram
  • *Considering 1 gram Gold costs Rs.3000

Reason 4: Liquidity

Gold can be converted to cash easily in case of a profit opportunity or crisis. While physical gold can be sold at gold jewellery stores across the globe, gold ETFs too can be sold within a matter of hours on the National Commodities & Derivates Exchange Limited (NCDEX) and Multi Commodity Exchange of India Ltd. (MCX).

Reason 5: Beauty

If you’re thinking, “Why not just buy jewellery?”, you’re not alone; more than 75% of the country's gold demand in 2016 stemmed from jewellery, as per World Gold Council's findings. Gold jewellery not only retains a much higher value than jewellery with studded stones or other precious metals, but also acts as a perfect heirloom.

A hedge against inflation and a long-term wealth creation asset, gold doubles up as a unique purchase to celebrate auspicious occasions. Weddings (24%), birthdays (15%), and religious festivals (12%), remain the top three occasions to invest in gold for Indians, as per a 2016 TNS survey.

Here’s hoping you make the most of your government-sanctioned lucky break!

Gold Glossary

Retail buyers

Retail buyers are the common individual buyers of gold.

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