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What is the best investment strategy for gold trading?

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  • What is the best investment strategy for gold trading?

    I'm looking for tips on gold trading/investing

  • #2
    Gold has historically been the default store of value. Gold can make you money in a recession and maintains the value or increases the value of your money as the value of the currency drops. In essence gold maintains the “buying power” of your money. Having said that, it is up to each individual investor to decide how much gold he/she wants in their portfolio. This will depend on how you feel about the market, how comfortable you are with volatility, and your overall financial needs and timeline. Ultimately, you should employ the same portfolio management strategies for allocating gold as for purchasing other investments.

    The last few decades have thrown-up a host of opportunities to invest in gold. Here are a few ways to invest in gold in India-

    i. Gold Coins and Bullion: This is the simplest and most conventional form of investing in gold. Gold bullion, bars and coins are made with a purest physical form of gold. Gold coins are available in different sizes. Gold bars, coins and bullion are of 24K (carats), and these can be kept safely in bank lockers or any other safe place.

    ii. Gold ETFs: There are various Gold Exchange Traded Funds (ETFs) that investors could buy. Gold ETFs are better than physical gold, and offer many advantages. Nobody can steal gold ETFs as they are in the electronic form. On the other hand, you do not have to incur storage charges. Taxation on Gold ETFs is done in the same manner as physical gold.

    iii. E-Gold: E-Gold allows investors to invest in gold with much lower denominations (1gm or 2gm) than physical gold. It is more convenient to buy and sell e-gold. Like we buy physical gold from shops and banks, we can buy e-gold electronically from the exchange. E-gold can be converted into physical gold at any moment of time. One of the benefits of investing in e-gold is that there is no holding cost.

    iv. Gold futures: You can buy into gold futures, which are traded on the MCX. These future prices tend to track gold prices, and the contracts have to be settled with a pre-determined period. Gold futures are risky investments as one has to settle futures even if they make a loss.

    Gold can be a profitable investment when all others fail. If you are concerned about inflation or the devaluation of your country’s currency, you may want to add gold to your portfolio. Nevertheless, as tempting as it may be to buy a lot of gold in a struggling economy, try not to get carried away. Gold bubbles exist, and in order to prevent yourself from being over-exposed to any asset class, you should always maintain a well-diversified and balanced portfolio.

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