Feb 27, 2016 Blogs 0 comment

Golden Rules To Follow When Investing In Gold Or Silver

When it comes to the matter of investment, gold and silver are usually the first thought that comes to our minds. While both gold and silver have industrial uses, they are popularly known for their uses in jewellery, art and coinage.

Precious metals such as these are stable in times of worldwide uncertainty or simply when a country’s economy goes through a bad phase. Gold and Silver have high demand in the market, resulting in a higher economic value. They are now considered mainly as investment and industrial supplies.

What are the advantages of investing in gold and silver?

1. They hedge against inflation:

When inflation rises, value of precious metals also increases and hence they can be efficiently used as a tool to hedge against inflation.

2. They diversify your investment portfolio:

Investing in precious metals can help you in diversifying your investment portfolio as it carries low risk and adds stability.

3. They are highly liquid:

One of the advantages of precious metals is that they are highly liquid assets. Gold, silver and other such metals can be easily sold anytime, anywhere.

4. They are safe:

Precious metals have always retained their value and earned the reputation as safe investments. Gold has always been considered to be a superior store of worth.

5. They are recognized worldwide:

Both Gold and Silver have an intrinsic value and are recognised worldwide as an investment opportunity. They can be bought and sold eagerly in any part of the world.

6. They can be pledged for loans:

Precious metals, especially gold- can be pledged for loan as they are the easiest means of obtaining loan against security.

7. They are available in various forms:

Apart from buying gold and silver in physical form, you can also select from various investing choices like ETFs, jewellery, coins, or mutual funds.

How to invest in precious metals?

1. Buy it in physical form
The simplest way to invest in precious metals like gold and silver is to buy them in the physical form of coins or bars.

2. Exchange traded funds (ETFs)
Gold ETFs are mutual fund schemes that invest in standard gold bullion. It is considered to be a convenient and inexpensive way to owning physical gold.
There are no silver ETFs in India as of now.

3. Futures trading on commodity exchanges
If you are a speculator or trader, then you can trade gold and silver futures on the National Commodity and Derivatives Exchange (NCDEX) and Multi Commodity Exchange (MCX).

4. E-gold and E-silver
National Spot Exchange Ltd (NSEL) has launched a unique investment product in gold and silver on its platform, that is e-gold and e-silver. It provides a chance for small investors to invest in gold and silver in small denominations of 1 gram for gold and 100 grams for silver.

5. Investing in shares of gold mining companies    

A secondary way of investing in gold is through the equity route, by investing in the shares of gold mining companies. The investment logic used here is that if the gold price rises, the profits of the gold mining company are expected to rise and as a result the share price rises.