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Did you know that investing in gold can also be risky? MintGenie explains how

(FILES) This file photo taken on August 5, 2020 shows gold bullion bars after being inspected and polished at the ABC Refinery in Sydney. - Four G7 powers will ban Russian gold exports in a new bid to stop oligarchs from buying the precious metal to avoid the impact of sanctions against Moscow, Britain said on June 26, 2022. The joint action taken by Britain, Canada, Japan and the United States, Premium
(FILES) This file photo taken on August 5, 2020 shows gold bullion bars after being inspected and polished at the ABC Refinery in Sydney. - Four G7 powers will ban Russian gold exports in a new bid to stop oligarchs from buying the precious metal to avoid the impact of sanctions against Moscow, Britain said on June 26, 2022. The joint action taken by Britain, Canada, Japan and the United States, "will directly hit Russian oligarchs and strike at the heart of (President Vladimir) Putin's war machine," said British Prime Minister Boris Johnson. (Photo by DAVID GRAY / AFP) (AFP)

  • Investing in gold is a widespread practice among Indians, however many people do not realise why gold is not the sole appropriate investment. Gold has failed to provide good returns to investors in recent years, and it may have even provided negative returns. Let's take a closer look at the topic.

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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

Physical Gold

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.

READ MORE: How are gold prices decided in India?

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.

READ MORE: Is digital gold worth the investment?

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.

 

For more such stories, visit MintGenie.

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