Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Is buying gold still profitable? - Outside View by PersonalFN
Is buying gold still profitable?

We all know gold is an important asset. However, following latest developments, one might be wondering if buying gold is really profitable now. Indian government is in no mood to lift the import restrictions imposed last year. Importing gold in India is costly. Due to gold import restrictions, gold enjoy premium in India. In simple terms, even after adjusting for currency differences, gold is costlier in India than in international market. Going one step forward, newer policies of government have made buying gold even less attractive.

Latest developments

  • In Budget 2014-15, long term capital gain tax on non-equity mutual funds was hiked from 10% to 20%. Also, the holding period for calculation of long term capital gains has been extended to 36 months, from the earlier 12 months. This is expected to impact the post-tax returns generated from gold savings funds and gold Exchange Traded Funds (ETFs), if held for less than 3 years. This change is applicable from 10th July 2014.

  • As per new law applicable to companies, jewellery companies can’t run gold deposit schemes if they are offering in excess of 12% returns to depositors. Furthermore, Jewellers can’t collect deposits greater than 25% of company’s net worth. Now buying gold in smaller installments through jewellers would also be less attractive.
PersonalFN believes recent policy changes may make buying gold unattractive. Having said this, you shouldn’t forget that, gold is not bought for earning maximum returns. Rather, it is bought as a portfolio diversifier. PersonalFN firmly believes having optimum asset allocation is important. While you prepare asset mix for yourself, you must consider your risk appetite and time horizon. Chasing an asset for earning maximum returns is speculation and should be avoided. PersonalFN recommends its investors to have 10% to 15% exposure to gold.

Should you still buy gold?

PersonalFN is of the view that, even after considering recent policy changes, buying gold ETFs or gold savings funds remains the most desirable option. After all gold ETFs and gold saving funds are among best options to accumulate gold. If you buy gold in physical form, you must always ensure that it remains in good state. Considering high insurance cost for physical gold, you may look to buy gold in paper form. Moreover gold ETFs ensure purity. Despite the long term capital gain tax rate on Gold ETFs has been doubled, real impact on your gains wouldn’t be as big as you may imagine. While calculating your profit for taxation purpose you can claim indexation benefit. Indexation benefit helps you adjust your purchase price upwards for inflation. Not a bad deal. This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund Research Firm known for offering unbiased and honest opinion on investing.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.


Equitymaster requests your view! Post a comment on "Is buying gold still profitable?". Click here!

1 Responses to "Is buying gold still profitable?"


Jul 26, 2014

Why not invest in Silver ?

Like (1)
Equitymaster requests your view! Post a comment on "Is buying gold still profitable?". Click here!

More Views on News

Sorry! There are no related views on news for this company/sector.

Most Popular

This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

Aug 17, 2017

A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working(Vivek Kaul's Diary)

Aug 21, 2017

Most Indians who cannot find jobs, look at becoming self-employed.

It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

Aug 16, 2017

The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

Think Twice Before You Keep Money In A Savings Bank Account(Outside View)

Aug 22, 2017

Post demonetisation, a cut in bank savings deposits rates was in the offing.

5 Steps To Become Financially Independent(Outside View)

Aug 16, 2017

Ensure your financial Independence, and pledge to start the journey towards financial freedom today!


Become A Smarter Investor In
Just 5 Minutes

Multibagger Stocks Guide 2017
Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
We will never sell or rent your email id.
Please read our Terms