Glistening like sunrays, gold captures human fascination as a treasured asset and marvelous adornment since antiquity. Countless civilizations flourished and perished chasing gold supplies for coinage, sculpture, artifacts, and jewelry affirming their wealth status. Fortunately, the modern financial world makes gold more accessible for investing compared to early prospectors!
How To Start Buying Gold For Beginners Yet for amateur investors today, questions abound on the right approaches to begin buying gold. Evaluating forms of gold, investment techniques, pricing, storage, etc. The multidimensional learning curve seems complex for dabbling into this asset class deemed profitable over decades against market vagaries.
This guide aims at unraveling key aspects for starters to make informed gold investment decisions matching risk appetite and goals.
Top Reasons Why Beginners Should Invest in Gold
Before covering ground realities, first understanding what makes gold a smart investment bet is vital.
Global reputation as a universal currency
From ancient kingdoms to modern exchanges, gold enjoys an unmatched reputation as a secure asset retaining value against corrosive inflation. The unique durability and scintillating aesthetic perpetuates demand globally.
The rarity of naturally occurring deposits limits gold’s production. Unlike fiat currency with unlimited printing affecting worth, gold rates stay relatively stable resisting extreme fluctuations.
Safe haven in tough economies
During financial meltdowns or geopolitical conflicts when currencies crumble, gold values shoot due to reliance as a hedge for stock market slides. Hence it gives profitable stability amidst turmoil.
Investment advisors tip for portfolio balancing across asset categories like equity, debt, real estate, etc. Adding a 15-20% gold allocation reduces portfolio risk while improving overall returns.
Inflation beating returns
Historically gold delivered 15% returns yearly outpacing inflation and severely eroding fiat savings. So parking funds in gold equals gaining more bang for the buck, particularly in high inflation periods.
Ideal passive income
Gold offers relatively steady earning opportunities without demanding time for trading unlike stocks or actively managed funds. Simply holding it gives appreciation returns and income if lent through gold schemes.
Now convinced about why gold merits investment, especially for greenhorns? Time to shed light on avenues for buying gold that suit first-time investors.
Digital Gold Investment Options
Technology revolutionizing finance makes gold investment easier through online channels allowing purchases in small denominations. Providers like SafeGold, MMTC-PAMP India, Augmont, etc. allow buying 24K gold starting modest units like 0.5 gms.
Key perks of digital gold buying are:
- Starts with sums like ₹100 providing easy entry
- sold anytime digitally through apps
- Stored securely in insured lockers by partners
- Easy to sell back near real-time rates via apps
- Transparent pricing and instant order execution
So for rookie savers, digital mode makes gold investment convenient, risk-free, and flexible to begin without paperwork hassles.
Indians often first experience gold purchases through family jewelry for milestones like weddings or cultural events. Beyond emotional significance, ornaments hold financial meaning allowing easy liquidation if required. Hence jewelry works well for starter gold investment.
- BIS Hallmarked gold ornaments assure 99.5% purity.
- Reputable family jewelers offer buybacks on their jewelry at prevailing rates.
- Avoid stone-studded jewelry having lower meltdown value.
- Opt for 22K which is easier to sell back over 18K pieces.
However, higher wastage/making charges for jewelry lowers returns unless held lifelong. Still it allows firsthand experience in this asset class.
Gold Bars & Coins
Investing through paper gold funds has counterparty risks. For assured purity returns, buying 99.9% fineness-certified coins, bars, and biscuits works.
SEBI-registered agencies like MMTC-PAMP enable buying 24K gold coins or bars with Swiss certifications.
Key positives for new investors are:
- Assay certification guaranteeing gold purity
- Low making cost of 2-4% over prevailing gold rates
- Buyback policy from the mints directly
- Credible storage of the certificates/gold
So it makes for safe possession with trust, unlike jewelry. Market-linked Gold ETFs through Demat are easier liquidation options but have holdings risks.
Gold Savings Schemes
In India, gold savings schemes from jewellers allow buying gold in monthly installments for 11 months culminating in the 12th month free gold amount. The investor can opt for cash redemption too.
- Disciplined mode of fixed monthly gold buying
- Zero wastage charges once the duration complete
- Fixed grams assured irrespective of rate moves
- Loans available against holdings after a specified lock-in
These make seasonal gold buying easier especially around annual bonuses or wedding seasons every spring.
How Gold Prices Are Determined?
Now understanding gold’s dynamic pricing globally requires grasping key indicators affecting the complex gold market.
In India, Multi-Commodity Exchange provides live tracking of gold rates quoted as price per 10 gms. MCX contracts use 100 gms bars of .995 purity for trading amongst jewelry makers.
Retail demand, import duties plus INR rate impact domestic gold prices daily.
Globally, the leading gold price benchmark comes from CME(Chicago Mercantile Exchange) COMEX contract reflecting trades on 100 oz .995 gold futures for delivery extracted from approved refineries.
It responds severely to international incidents like wars or deteriorating equities inducing safe haven demand.
London Bullion Market Association steers daily global price setting for over 95% gold traded. Key members include producers, refiners, central banks, and exchanges establishing governance.
Both spot rates for immediate delivery and forward future contracts get dealt. LBMA prices relate to 400 oz bar trading.
Now that gold valuation complexity is clearer, the next critical area is auditing its karat/purity while buying gold, especially for rookies.
Essential Gold Buying Guide for Starters Checklist
New investors must follow stringent protocols to assure quality gold procurement without impurities or inferior blending.
Hallmarking Center certifies gold jewelry in India for fineness guarantee through BIS benchmarks.
- 375, 585, 916 hallmarks denote 37.5% 75%, and 91.6% gold purity with alloy mixing
- 24K gold gets 999 purity
- Most jewelry uses 22K standard at 91.6% farther divided amongst 18K, 20K, 21K
- Older ornaments may skip hallmarking but test before buying
Reputable jewelers provide serial numbered invoice mentioning price, taxes, certifying Karat purity. This aids easy exchange/sale to other dealers.
Check gold rates across stores before buying to identify best deals. Online aggregators like CaratLane assist in price discovery.
For Gold jewelry, focus on classic patterns likely to sustain appeal for resale versus stone studded ornamentation losing value.
Get purchases assay tested through certified evaluation labs to reconfirm purity. This facility comes included with MCX-registered gold coin/bar purchases.
Following such due diligence empowers first-time buyers to make informed gold procurements avoiding major slip-ups or impure quality.
How To Select The Right Form of Gold for Investment?
Now comes the crucial learning – picking suitable types of gold aligning investment horizons and liquidity needs. Let us explore standard gold buying forms:
1. Physical Gold
Includes gold jewelry coins, and bars procured from BIS-certified sellers like banks, and bullion traders. Easy possession, including resale value despite entering and exiting overheads. Prone to security risks being stored externally or domestically. Risk category: High
2. Gold ETF/e-Gold units:
Paper Gold instruments investing in 99.5% gold ETF funds allow trading on stock exchanges. No physical ownership but easier exit freedom through online selling anytime at market rates applying low charges. Units get allotted against Demat storage. Relatively less risk than physical gold. Risk category: Medium
3. Sovereign Gold Bonds(SGB)
Government releases Sovereign Gold Bonds as an alternate instrument for owning paper gold but with sovereign backing. It allows earning a fixed 2.5% added interest annually. Has 8-year tenures allowing exit through bourses. No handling/storage hassles either unlike physical gold. Risk category: Low
4. Gold Savings Fund
Works like mutual funds pooling investor money towards Gold ETFs. ButSIP/STP monthly contributions feature lowers entry barriers for buying paper gold. Ideal for conservative first-time Systematic savers compared to risky equity funds. Risk category Low.