Summary of this article
Gold prices depend on global rates, inflation and currency movements.
Jewellery charges and resale deductions can reduce your returns.
Gold ETFs offer exposure without physical storage or jewellery charges.
When we talk about Dhanteras, the first thing that comes to our mind is buying gold. Some buy jewellery, others prefer coins or bars as a way to save money. For as long as we can remember, gold has always been seen as a source of financial security.
But before making a purchase this year, you should look beyond the gold rate. The resale value of the article, making charges, and the amount of gold you already own should also be kept in mind.
The 'Right' Time To Buy Gold
Gold prices can move up or down depending on factors such as global interest rates, inflation, changes in the dollar-rupee exchange rate and geopolitical tensions. These factors make it difficult to know whether gold will become cheaper or more expensive in the coming days.
Market movements can easily influence buying decisions. "When gold prices are going up, we are constantly thinking about whether we should buy gold right away. When gold prices are falling, we tend to wait for gold prices to fall more. This emotional roller coaster leads to making bad financial decisions," says Sweta Singh, a certified financial planner, founder and CEO of GyaanRoots.
Currency movements also impact gold prices in India. If the rupee loses value against the US dollar, domestic gold prices can rise even when international prices fall.
Singh advises buyers against putting a large amount into gold on a single day. Instead, she recommends, "Create wealth over the long term by buying smaller amounts on a regular basis. You could buy a token coin or piece of jewellery on Dhanteras, but do not buy a lump-sum of gold on that day. Gold Systematic Investment Plans (SIPs) allow you to create wealth over the long term by spreading your investments over the year and avoiding timing errors caused by short-term price fluctuations."
Right Share of Gold In The Portfolio
Gold can create a balanced investment portfolio during uncertain conditions. However, Singh cautions against spending too much on gold at the cost of other investments.
Singh suggests that investors can consider keeping 5 per cent to 15 per cent of their portfolio in gold, depending on their financial goals, risk appetite and existing investments. She adds,"Your allocation to gold should not be determined by a festival, jewellery advertisement or rising gold prices. It should be based on your financial plan."
Those who already have a large sum invested in gold may consider replacing gold with another purchase this Dhanteras.
Jewellery, Coins And Gold ETFs: Cost Comparison
The cost of buying gold is not limited to its market price. Making charges, the Goods and Services Tax (GST), storage expenses, and resale deductions can determine how much money buyers get back when they sell it.
Singh explains why jewellery may not be the best choice for someone looking purely at investment returns.
"Buy it for happiness, not for investment returns. When you buy jewellery, you are paying for gold, making charges, wastage and GST. When you sell jewellery later, you usually do not get making charges or GST back."
Coins and bars are another option for those who want to own physical gold. However, buyers should check minting charges, storage costs and the seller's buyback terms.
Gold exchange-traded funds (ETFs) and mutual funds allow investors to invest in gold without keeping it at home or paying for physical storage. However, these products also involve investment costs and market risks.
Note: Costs and charges are indicative and vary by seller, product and scheme. Verify applicable taxes and fees before purchasing
Checks To Make Before Buying Gold
Before buying gold, buyers should be clear about whether the purchase is for wearing, gifting or investment. For jewellery, they should check the Bureau of Indian Standards (BIS) hallmark and the six-digit Hallmark Unique Identification (HUID) number.
An itemised bill is equally important. It should mention the gold rate, weight, purity, making charges and GST so that buyers know exactly what they are paying for.
Singh sums up the financial side of festive gold buying with a simple reminder: "An auspicious day does not make a financially expensive purchase attractive."
