Is buying gold still profitable? - Outside View by PersonalFN

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Is buying gold still profitable?
Jul 26, 2014

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.

Disclaimer:

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?"

Learner

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

Why Gold Hit Lower Circuit (Fast Profits Daily)

Jan 11, 2021

Were you shocked that bullion prices hit lower circuits on Friday on the MCX? Find out why it happened...

My Top 5 Gold ETFs (Fast Profits Daily)

Dec 28, 2020

In this video, I'll tell you my list of the top 5 gold ETFs in India.

Gold ETFs or Gold Bullion? (Fast Profits Daily)

Dec 14, 2020

Should you buy gold in physical form or in electronic form? Find out in this video.

Should You Buy Platinum or Gold or Silver Now? (Fast Profits Daily)

Aug 24, 2020

The precious metals market is booming but are all precious metals a buy? Find out in this video...

Warren Buffett is Bullish on Gold. Are you? (Fast Profits Daily)

Aug 18, 2020

Warren Buffett has bought a stake in a gold mining company. What does this mean for gold bulls?

More Views on News

Most Popular

Is Intraday Trading For You? (Fast Profits Daily)

May 13, 2021

Do you think you have what it takes to be an intraday trader? Find out in this video.

My Secret to Find Breakthrough Stocks (Fast Profits Daily)

May 7, 2021

I've used this trading technique for many years with great success. I'm sharing it with you today.

Are the Stock Markets Deaf to Covid Agony? (Profit Hunter)

May 6, 2021

Why are markets discounting the economic impact of Covid?

The Key to Profit from India's EV Revolution (Profit Hunter)

May 7, 2021

Stocks you must consider investing in before buying your first electric vehicle.

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

MARKET STATS