Summary of this article
Despite record prices, small and needs-based gold purchases can continue this Dhanteras
Experts advise staggered investing through ETFs or digital gold to average costs
Allocate 15–20 per cent of portfolio to gold for inflation hedge and diversification
Physical gold attracts GST and capital gains tax; ETFs offer safer liquidity
Given that gold is at an all-time high, many purchasers are prudent. Nonetheless, festive and emotional purchases need not be halted—small purchases or needs-based purchases can take place during Dhanteras. From the standpoint of investment, prices may fluctuate in the short term. Still, the longer term remains a bullish outlook due to the uncertainty in the U.S. economy, due to the government shutdown, potential interest rate adjustments in the future, and solid central bank buying.
Have A Staggered Buying Approach
However, from record prices, investors should expect gold's returns to moderate as the metal goes through a phase of consolidation following a rally. "In general, investors should view gold exchange-traded funds (ETFs) as a vehicle for reducing risk and diversifying in the long term; offering stability during inflation, currency weakening, or geopolitical tension, over short-term hoping for high returns," Renisha Chainani, head of research, Augmont.
"Waiting for the opportunity for a sharp correction and deep selling is likely not practical, as some structural drivers remain strong. Therefore, investors may want to consider a staggered buying approach to dollar cost average through ETFs or with digital gold and minimise risk related to timing," says Prithviraj Kothari, Managing Director, RiddiSiddhi Bullions, president, India Bullion and Jewellers Association, and Chairman, Jain International Trade Organisation.
Balance Festive Purchases With Long-Term Goals
Consumers are able to distinguish between purchases made for either consumption or investment. Jewellery or coins purchased for special occasions or family gatherings may serve an emotional or cultural purpose.
ETFs, gold mutual funds, or digital gold options provide the most liquid, option; allowing exposure to gold in the most transparent manner, and are the best means for long-term wealth creation.
"Maintaining a diversified allocation of approximately 15-20 per cent of one's portfolio to gold will help one to reduce exposure to price volatility, while continuing to be a hedge against inflation and currency depreciation over time," says Kothari.
Agrees Chainani, "With gold's sharp rise, staggered investments via systematic investment plans (SIPs) or systematic investment allocation is a much safer approach than liquidity-based, lump sum purchases." This enables you to average and soften entry points simultaneously and gives you a level of integration of volatility, especially on the short-term corrections post the festive season.
Tax, Storage, And Liquidity Aspects
Physical gold is subject to three per cent GST on value and five per cent GST upon making charges for jewellery, plus ongoing safekeeping and insurance costs. "Capital gains tax will apply when sold, with short-term gains (held for under 24 months) taxed according to one's income slab and long-term (held for above 24 months) taxed at 12.5 per cent without indexation according to the Finance Act 2024," says Kothari.
Gold ETFs and mutual funds eliminate all liquidity, purity risk, and safekeeping charges. For physical gold, the recommendation is to ensure there is a BIS hallmark and retain the invoice in a safe place to prove cost and authenticity for resale or taxation.
