SIES COLLEGE OF ARTS, SCIENCE AND

COMMERCE
(AUTONOMOUS)

PROJECT REPORT ON
(Gold as an Investment Option with Reference to Suburban Mumbai)

SUBMITTED BY

Sahaya Caroline

Roll No: TCM2223041

T.Y. BMS. (CAPITAL MARKET)

(SEMESTER VI)

SUBMITTED TO

UNIVERSITY OF MUMBAI

PROJECT GUIDE

Asst. Prof. Ankit kanaojia

ACADEMIC YEAR

2022 - 2023

1
 SIES College of Arts, Science and
Commerce
(Autonomous)
Jain Society, SIES Ln, Sion West, Mumbai,
Maharashtra - 400022.
NAAC Reaccredited – ‘A’ Grade

PROJECT REPORT ON
(Gold as an Investment Option with Reference to Suburban Mumbai)

SUBMITTED BY

Sahaya Caroline

Seat No – TCM2223041

T.Y. BMS. (CAPITAL MARKET)

(SEMESTER VI)

SUBMITTED TO

UNIVERSITY OF MUMBAI

PROJECT GUIDE

Asst. Prof. Ankit kanaojia

ACADEMIC YEAR

2022-2023

2
 CERTIFICATE

This is to certify that (Sahaya Caroline) of T.Y.BMS. in (CAPITAL

MARKET) has successfully completed a project on Gold as an

Investment Option with Reference to Suburban Mumbai for the

Semester – VI under the guidance of Asst. Prof. Ankit kanaojia

during the academic year 2022 -2023.

Coordinato Project Principal

r Guide

Internal External
Examiner Examiner

College Seal

3
 DECLARATION

I (Sahaya Caroline) of SIES College of Arts, Science and

Commerce (Autonomous), student of T.Y.BMS(CM)
(Bachelor of Management Studies in Capital Market),
Semester VI, hereby declare that I have completed my
project title “Gold as an Investment Option with Reference to
Suburban Mumbai”
I also declare that this project which has been the partial
fulfillment of the requirement of the degree of
T.Y.BMS(CM) (Bachelor of Management Studies in
Capital Market) of the “Mumbai University” has been the
result of my efforts.

Signature of Student

_(SahayaCaroline)_

4
 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so

numerous and the depth is so enormous.

I would like to acknowledge the following as being idealistic channels

and fresh dimensions in the completion of this project.

I have sincerely done my project allotted to me. I would like to thank

Asst. Prof Ankit kanaojia the guide for giving her valuable suggestion
and guidance.

I would also like to thank our Principal Dr. Uma Shankar and our
Vice Principal Dr. Tara Menon

It gives me immense pleasure to present this project during Bachelor

of Management Studies in Capital market, and I also would like to
share the credit with Dr. Antonette Mohan Lobo our college librarian
for her valuable, helps in this project.

I would like to thank all those people who gave me their opinion
without their help this project would not be possible to submit in time.
Lastly, I would like to thank each and every person who directly or
indirectly helped me in the completion of the project especially my
Parents and Peers who supported me throughout my project.

5
 TABLE OF CONTENTS

SR. NO. PARTICULARS PAGES

---- EXECUTIVE SUMMARY 7

CHAPTER INTRODUCTION 8 – 57
1

CHAPTER RESEARCH 58 - 63
2 METHODOLOGY

CHAPTER LITERATURE REVIEW 64 - 68

3

CHAPTER DATA ANALYSIS AND 69 - 87

4 INTERPRETATION

---- FINDINGS 88 - 89

---- RECOMMENDATION 90 - 91

CHAPTER CONCLUSION 92 - 93
5

CHAPTER BIBLOGRAPHY 94 - 95
6

CHAPTER ANNEXTURE 96 – 100

7

6
 EXECUTIVE SUMMARY

This project report is basically done on the gold which is a component traded in
the commodity market. Gold is an inflation hedge & also short-term fluctuations
in Gold offer good potential for trading. It is in the upward trend and in the
current it is safe to invest in the gold.
The basic objective behind the project is analyzing the gold market the factors
affecting it and fluctuation in the gold market. And to understand the various
investment options for investors, factors need to be aware of and know-how of
investing in gold, pros and cons of various forms of investments and to assist
investors in creating awareness about various gold investment options.
This project report will help the investors to analyze the right time for investment
in the gold. They will also come to know about the various factors which affect
the gold market. While doing this project the history and the company profile are
basically searched either from the internet or by the literature review of the
company. This means that it is basically based on the secondary source. Also the
topic related concepts are done on the basis of the secondary sources. The data for
the analysis is taken either by the consulting the company’s employees or from
the net. So it is partially primary and partially secondary. The analysis part is
done with the help of Microsoft Excel by computing the required output. Finally
the conclusions and recommendations have been written on the self-finding basis.

The study period has its own contemporary economic, political and social
situations and environment which might affect the prices of the scripts and Gold.
Thus, results are subject to overview of the situations and environment prevailing
at that time.

For the purpose of study the primary data and secondary data has been collected.
Primary data consists of questionnaire and secondary data through website,
research papers and magazines. Based on the research it is found that many
investor still prefer jewelry, gold coins and gold bullion bars forms of investment
and prefer to invest in ETF and Futures and options which gives more profit and
easy form of investment.

7
 CHAPTER 1

INTRODUCTION

Gold – An Investment paradise

Gold has been synonymous to wealth and prosperity through the ages. The
history of Gold dates back to as early as 4000 BC when the prehistoric men used
it as a tool. Since then Gold has filled the pages of history as the divine metal that
has attracted the attention of men powerful and otherwise. Gold was the source of
power for the kings. Wars were waged; lives were lost as kingdoms piled up and
hoarded tons of Gold. In the modern history, Gold became the international
currency as the Gold standard came into existence. Even after the dismantling of
Gold standard, Gold existed as the backbone of international trade and economics
as the US accumulated tones of yellow metal. Till today, Gold has retained its
basic use as a commodity without losing its sheen as a currency.
Gold, because of its ability to protect the wealth of investors can be an ideal
addition to a portfolio. Also the short-term fluctuations in Gold offer good
potential for trading. Gold has been on its long-term upwards trajectory which
began in early 2001. This long-term move has been punctuated by short-term
pullbacks offering opportunities for late entrants to join the bandwagon. With the
US economy outgrowing the league of developed nations during the last two
years coupled with the worsening of long-term structural weaknesses and the
subsequent movements in the USD have moved the focus away from Gold’s use
as a commodity. However the long-term fundamentals of the yellow metal have
also undergone a significant change with the mining output falling quite steadily
during the last decade coupled with an evergreen demand especially from Asia.
This report analyses the long-term and short-term fundamental factors expected to
move Gold prices. We believe that the short-term weakness expected in gold is a
great opportunity for the late-comers to join the great Gold. Strategically, gold is
one of the two most important commodities on the planet along with crude oil.
Gold has been historically recognized as the ultimate store of value and method
of payment. The following characteristics of Gold have enabled it play this role:

8
 It is durable, homogenous and divisible

 Gold’s rarity gives it intrinsic value and that value is high per unit of volume.

 Its value is recognized across the globe and is traded in a continuous market.

 Gold is the only financial medium of exchange that is not someone else’s
liability.

In updating our price outlook, we have considered the following

factors:

 Investment demand will continue to be the prime driver for the rally in Gold
prices,

 As economic factors will make gold more attractive compared to other financial
assets.

 Furthermore strong buying support from the Central Banks of Russia, China and
Middle East countries will help support the rally in Gold prices.

 Mine production will not be able to meet current demand due to lack of new
Discoveries.

 The long term average in the Crude/Gold ratio has been around 16 times.

Currently only around 10 times. In the remaining part of this report we will
consider the major factors that are likely to drive Gold prices higher in the near
future.

Of all the precious metals, gold is the most popular as an investment. Investors
generally buy gold as a way of diversifying risk, especially through the use

9
of futures contracts and derivatives. The gold market is subject to speculation and
volatility as are other markets. Compared to other precious metals used for
investment, gold has the most effective safe haven and hedging properties across
a number of countries.

Gold has been used throughout history as money and has been a relative standard
for currency equivalents specific to economic regions or countries, until recent
times. The system existed until the 1971 Nixon Shock, when the US unilaterally
suspended the direct convertibility of the United States dollar to gold and made
the transition to a fiat currency system. The last major currency to be divorced
from gold was the Swiss France in 2000.
Since 1919 the most common benchmark for the price of gold has been
the London gold fixing, a twice-daily telephone meeting of representatives from
five bullion trading firms of the London bullion market. Furthermore, gold is
traded continuously throughout the world based on the intra-day spot price,
derived from over-the-counter gold-trading markets around the world
(code "XAU"). The following table sets out the gold price versus various assets
and key statistics at five-year intervals.

Investing in gold is not like buying stocks or bonds. You can take physical
possession of gold by buying either gold coins or gold bullion. You can also buy
stock in gold mining companies, gold futures contracts, gold-focused exchange-
traded funds (ETFs), and other regular financial instruments.

Gold's primary use is for jewellery, which makes up roughly 50% of gold
demand. Another 40% of demand comes from the physical investment in gold by
individuals and central banks, and includes gold coins, bullion, medals, gold bars,
and demand from ETFs and similar products that invest directly in gold on behalf
of others. The remainder of demand is largely industrial in nature (dentistry, for
example).

Step back from those statistics, and it's clear that roughly 90% of gold demand is
based on its intrinsic value. This is something of a historical issue, since the world
basically chose gold as a currency thousands of years ago. In fact, at one point,
most paper money was backed by a country's holdings of physical gold. That time

10
has passed, of course, with fiat currencies now backed by the promise of a
government to make good on its obligations.

Although governments have decided it's easier to be off the gold standard than on
it, that doesn't change the central issue that backs gold's intrinsic value and safe-
haven status: There's only so much gold in the world. The gold that's above
ground being used in some fashion is estimated to be around 190,000 metric tons.
The amount of gold in the ground that can be economically mined today is
notably less, at roughly 54,000 metric tons.

This is a big issue: If someone wants another ounce of gold, they have to dig it
up. And aside from hiding gold, there's no realistic way to make it disappear.
Meanwhile, no one will be making any more of it (as medieval alchemists proved
long ago), leaving technological advances and price increases as the only ways to
increase the economically viable reserve of gold. Although it is the balance
between supply and demand that results in a price for gold, the physical nature of
it is what provides its intrinsic value. By contrast, if the U.S. government wants
another dollar, it just prints one.

So gold is a physical asset that we wear as jewellery or own in the form of coins
and bars, with supply and demand driving the price. But to get an idea of what
that means relative to other assets you need to look at some statistics, like
standard deviation. Standard deviation is the degree to which the price of
something varies from its average over a given period of time, with lower
numbers suggesting less price variability.

Gold Is Risky, and That's Not All Bad

The thing is, gold and stocks don't always do the same thing at the same time. For
example, when the stock market is doing well, gold often lags behind. And since
the market has a long history of heading higher over time, owning gold as your
only investment would clearly be a risky proposition. But the interplay between
stocks and gold is where gold's value lies for investors - and why it can be a safe
investment if you use it properly.

11
Therefore, one of the tools which are popular for this purpose is the financial
Investment which allows a person to multiply his savings by investing it into
Gold. Gold, it is easily the oldest form of currency in use on earth. It was used by
our ancestors centuries ago and is still used today, its mention can even be found
in the epics of Hindu mythology which highlights the position that gold holds in
the Indian and especially Hindu culture. It is considered as a carrier of good luck
and thus is gifted to the new brides and other important milestones of life as well.

One of the major reasons for making any financial investment is that you consider
it as a backup if in case you need it in future and gold is one of the most of the
easy to liquidate the hard asset. In case you happen to be in need to use your gold
to make your ends meet, you just have to sell it to the buyer you prefer. There are
always buyers ready to buy the gold. But keep in mind the return rate is not
exactly what you expect, instead, it is opposite especially in the case of physical
gold, you get less than what you invest.

It has been tested time and again that gold provides a strong shield against
inflation. Gold rates remain almost unaffected at the time of inflation and
therefore, you do not have to suffer a loss when the inflation hits and even the
currency rates go down in the global market. Now, talking in the Indian context,
the value of Rupee has not been performing well in 2020 and therefore, investing
in gold is not a bad idea at all.

Gold is a precious metal and we all know that. As we have mentioned earlier,
gold holds a special place in any Indian household and is considered a wealth of
the family, for example, the gold jewels are passed on from one generation to the
other as a legacy and a symbol of family wealth.

Types of Gold Investment

For the majority of investors, the first three options are the primary choices to
pick from when wanting to buy gold. Each of these three forms of gold
investment have their advantages, as well as their potential disadvantages.

Whilst nearly everyone is familiar with the idea of how to buy gold jewelry, gold
investment typically comes in three main forms:

12
1. Physical Bars and Coins-

Individuals who choose to make a gold investment through physical bars and
coins can be comfortable that they have full legal title to the gold they have
bought. They also have the advantage that, via this form of gold investment, they
will be able to trade their gold around the clock, provided of course they are
buying and selling with a reputable, accredited bullion dealer.

Over the long-run, a gold investment in bars and coins can also be the cheapest, as
storage costs are either free (if stored at home), or very cheap, if the physical metal is
stored in a private vault. Unquestionably, buying physical bars and coins is the safest
form of gold investment as it eliminates third party risk, which you will still have if you
buy gold in securitized form for example. There is also no question that your
investment will match the gold price, as that is exactly what you’ve bought,
whereas other options, like a gold ETF, are meant to track the gold price but don’t
always do so perfectly.

2. Gold ETFs-

For some individuals, using a gold ETF makes more sense for their gold
investment. The primary advantage of this form of gold investment is that it is
really easy, as any investor with a brokerage account can buy a gold ETF in much
the same way they buy and sell shares in their favorite listed companies.

There are however some disadvantages to this form of gold investment, the most
obvious of which is that you don’t actually own gold when buying a gold ETF.
Instead, you own a security, and the security is in theory backed by physical gold,
owned by a third party on your behalf. But if the gold price doubles over 5-10
years, then you’re fee will also double, as it is linked to the value of the gold.

3. Gold Mining Shares-

Arguably the most risky form of gold investment is to buy shares in gold mining
companies, or companies exploring for gold. The reason that this is the riskiest is
that the companies may never actually find gold (in the case of gold explorers) or
build a profitable mine.

13
Even the companies that are producing gold can see output fall, or costs rise, both
of which can play havoc with their margins, and cause extreme volatility in the
price of their shares. In short, you aren’t really making a gold investment per se
when you buy shares in a gold mining company. Instead you are buying an
ownership stake in a company that is in the business of finding gold and selling it
to the market at a profit (hopefully).

Ways To Invest In Gold

1. Gold Coin Scheme-

Gold coins can be bought from jewelers, banks, non-banking finance companies,
and now even e-commerce websites. The government has launched ingeniously
minted coins which will have the National Emblem of Ashok Chakra engraved on
one side and Mahatma Gandhi on the other. The coins are available in
denominations of 5 and 10 grams while the bars will be for 20 grams.

2. Gold Savings Scheme-

Gold or jewelry savings schemes come in two forms. A typical one allows you to
deposit a fixed amount every month for the chosen tenure. When the term ends,
you can buy gold (from the same jeweler) at a value that is equivalent to the total
money deposited, including a bonus amount. This conversion is done at the gold
price prevailing on maturity. In most cases, the jeweler, adds a month's instalment
at the end of the tenure as a cash incentive or may even offer a gift item.

3. Gold Exchange Traded Funds (ETF)-

An alternate way of owning paper gold in a more cost-effective manner is

through gold exchange traded funds (Gold ETF). Such investments (buying and
selling) happens on a stock exchange (NSE or BSE) with gold as the underlying
asset. What's more, the high initial buying and even selling charges that go into
owning jewelry, bars or coins gives an extra edge to the low-cost gold ETF. The
transparency in pricing is another advantage. The price to which it is bought is
probably the closest to the actual price of gold and therefore the benchmark is the

14
physical gold price.
4. Digital Gold-

You can now purchase gold coins, bars and jewelry online. 'Digital Gold', is
offered on the mobile wallet platform of Paytm and 'Gold Rush' is offered by the
Stock Holding Corporation of India on their website, while Motilal Oswal has
launched Me-Gold, a digital gold online investment. All of these are offered in
association with MMTC - PAMP, (a joint venture between public sector MMTC
and Switzerland's PAMP SA)

5. Making a Choice-

The initial cost of owning physical gold in the form of bars or coins is anywhere
around 10 percent and it is even higher for jewelry. SGB and Gold ETF, both
paper-gold, are cost effective as there is no entry cost in SGB while costing for
gold ETF could be around 1 percent. SGB should benefit those who want to
invest in gold for a longer period as its maturity is after 8 years, although the
lock-in ends from the fifth year. However, gold ETF provides much better
liquidity than SGB. Owing units is much easier than SGB as it's entirely online in
case of ETFs. The risk of owning, holding also doesn't exist in both. The big
difference is on the taxation front. Gains in SGB on redemption are tax-exempt
but gains in Gold ETFs after 3 years are subject to 20 percent tax post indexation.

The only disadvantage with gold ETFs is that its units won't be earn the
additional interest of 2.5 per cent per annum like you would get for SGBs. Get
clarity as to why you need to invest in gold - is it for marriage purpose or for pure
investment. For investments, one should not have more than 10 percent of the
total portfolio in gold. Choose between Gold ETFs or SGBs depending on how
comfortable you are managing investments online and keep the worries of purity,
security aside

15
 Investment vehicles

1. Bars

1 troy ounce (31 g) gold bar with certificate

The most traditional way of investing in gold is by buying bullion gold bars. In
some countries, like Canada, Austria, Liechtenstein and Switzerland, these can
easily be bought or sold at the major banks. Alternatively, there are bullion
dealers that provide the same service. Bars are available in various sizes. For
example, in Europe, Good Delivery bars are approximately 400 troy ounces (12
kg). 1 kilogram (32.2 ozt) bars are also popular, although many other weights
exist, such as the 10 ozt (310 g), 1 ozt (31 g), 10 g, 100 g, 1 kg, 1 Tael (50 g in
China), and 1 Tola (11.3 g).

Bars generally carry lower price premiums than gold bullion coins. However
larger bars carry an increased risk of forgery due to their less stringent parameters
for appearance. While bullion coins can be easily weighed and measured against
known values to confirm their veracity, most bars cannot, and gold buyers often
have bars re-assayed. Larger bars also have a greater volume in which to create a
partial forgery using a tungsten-filled cavity, which may not be revealed by an
assay. Tungsten is ideal for this purpose because it is much less expensive than
gold, but has the same density (19.3 g/cm3).

Good delivery bars that are held within the London bullion market (LBMA)
system each have a verifiable chain of custody, beginning with the refiner and
assayer, and continuing through storage in LBMA recognized vaults. Bars within
the LBMA system can be bought and sold easily. If a bar is removed from the
vaults and stored outside of the chain of integrity, for example stored at home or

16
in a private vault, it will have to be re-assayed before it can be returned to the
LBMA chain. This process is described under the LBMA's "Good Delivery
Rules".

The LBMA "traceable chain of custody" includes refiners as well as vaults. Both
have to meet their strict guidelines. Bullion products from these trusted refiners
are traded at face value by LBMA members without assay testing. By buying
bullion from an LBMA member dealer and storing it in an LBMA recognized
vault, customers avoid the need of re-assaying or the inconvenience in time and
expense it would cost. However this is not 100% sure; for example, Venezuela
moved its gold because of the political risk for them. And as the past shows, there
may be risk even in countries considered democratic and stable; for example in
the US in the 1930s gold was seized by the government and legal moving was
banned.

Efforts to combat gold bar counterfeiting include kinebars which employ a unique
holographic technology and are manufactured by the Argor-Heraeus refinery in
Switzerland.

2. Coins
Gold coins are a common way of owning gold. Bullion coins are priced according
to their fine weight, plus a small premium based on supply and demand (as
opposed to numismatic gold coins, which are priced mainly by supply and
demand based on rarity and condition).

The sizes of bullion coins range from 0.1 to 2 troy ounces (3.1 to 62.2 g), with the
1 troy ounce (31 g) size being most popular and readily available.

The Krugerrand is the most widely held gold bullion coin, with 46 million troy
ounces (1,400 tonnes) in circulation. Other common gold bullion coins include
the Australian Gold Nugget (Kangaroo), Austrian Philharmoniker
(Philharmonic), Austrian 100 Corona, Canadian Gold Maple Leaf, Chinese Gold
Panda, Malaysian Kijang Emas, French Napoleon or Louis d'Or, Mexican Gold
50 Peso, British Sovereign, American Gold Eagle, and American Buffalo.

Coins may be purchased from a variety of dealers both large and small. Fake gold
coins are common and are usually made of gold-layered alloys.

17
3. Gold rounds
Gold rounds look like gold coins, but they have no currency value.They range in
similar sizes as gold coins, including 0.05 troy ounces (1.6 g), 1 troy ounce (31
g), and larger. Unlike gold coins, gold rounds commonly have no additional
metals added to them for durability purposes and do not have to be made by a
government mint, which allows the gold rounds to have a lower overhead price as
compared to gold coins. On the other hand, gold rounds are normally not as
collectible as gold coins.

4. Exchange-traded products
Gold exchange-traded products may include exchange-traded funds (ETFs),
exchange-traded notes (ETNs), and closed-end funds (CEFs), which are traded
like shares on the major stock exchanges. The first gold ETF, Gold Bullion
Securities (ticker symbol "GOLD"), was launched in March 2003 on the
Australian Stock Exchange, and originally represented exactly 0.1 troy ounces
(3.1 g) of gold. As of November 2010, SPDR Gold Shares is the second-largest
exchange-traded fund in the world by market capitalization.

Gold exchange-traded products (ETPs) represent an easy way to gain exposure to

the gold price, without the inconvenience of storing physical bars. However
exchange-traded gold instruments, even those that hold physical gold for the
benefit of the investor, carry risks beyond those inherent in the precious metal
itself. For example, the most popular gold ETP (GLD) has been widely criticized,
and even compared with mortgage-backed securities, due to features of its
complex structure.

Typically a small commission is charged for trading in gold ETPs and a small
annual storage fee is charged. The annual expenses of the fund such as storage,
insurance, and management fees are charged by selling a small amount of gold
represented by each certificate, so the amount of gold in each certificate will
gradually decline over time.

Exchange-traded funds, or ETFs, are investment companies that are legally

classified as open-end companies or unit investment trusts (UITs), but that differ
from traditional open-end companies and UITs. The main differences are that
ETFs do not sell directly to investors and they issue their shares in what are called
18
"Creation Units" (large blocks such as blocks of 50,000 shares). Also, the
Creation Units may not be purchased with cash but a basket of securities that
mirrors the ETF's portfolio. Usually, the Creation Units are split up and re-sold on
a secondary market.

ETF shares can be sold in two ways: The investors can sell the individual shares
to other investors, or they can sell the Creation Units back to the ETF. In addition,
ETFs generally redeem Creation Units by giving investors the securities that
comprise the portfolio instead of cash. Because of the limited redeemability of
ETF shares, ETFs are not considered to be and may not call themselves mutual
funds

5. Certificates
Gold certificates allow gold investors to avoid the risks and costs associated with
the transfer and storage of physical bullion (such as theft, large bid–offer spread,
and metallurgical assay costs) by taking on a different set of risks and costs
associated with the certificate itself (such as commissions, storage fees, and
various types of credit risk).

Banks may issue gold certificates for gold that is allocated (fully reserved) or
unallocated (pooled). Unallocated gold certificates are a form of fractional
reserve banking and do not guarantee an equal exchange for metal in the event of
a run on the issuing bank's gold on deposit. Allocated gold certificates should be
correlated with specific numbered bars, although it is difficult to determine
whether a bank is improperly allocating a single bar to more than one party.

The first paper bank notes were gold certificates. They were first issued in the
17th century when they were used by goldsmiths in England and the Netherlands
for customers who kept deposits of gold bullion in their vault for safe-keeping.
Two centuries later, the gold certificates began being issued in the United States
when the US Treasury issued such certificates that could be exchanged for gold.
The United States Government first authorized the use of the gold certificates in
1863. On April 5, 1933, the US Government restricted the private gold ownership
in the United States and therefore, the gold certificates stopped circulating as
money (this restriction was reversed on January 1, 1975). Nowadays, gold

19
certificates are still issued by gold pool programs in Australia and the United
States, as well as by banks in Germany, Switzerland and Vietnam.

6. Accounts
Many types of gold "accounts" are available. Different accounts impose varying
types of intermediation between the client and their gold. One of the most
important differences between accounts is whether the gold is held on an
allocated (fully reserved) or unallocated (pooled) basis. Unallocated gold
accounts are a form of fractional reserve banking and do not guarantee an equal
exchange for metal in the event of a run on the issuer's gold on deposit. Another
major difference is the strength of the account holder's claim on the gold, in the
event that the account administrator faces gold-denominated liabilities (due to a
short or naked short position in gold for example), asset forfeiture, or bankruptcy.

Many banks offer gold accounts where gold can be instantly bought or sold just
like any foreign currency on a fractional reserve basis. Swiss banks offer similar
service on a fully allocated basis. Pool accounts, such as those offered by some
providers, facilitate highly liquid but unallocated claims on gold owned by the
company. Digital gold currency systems operate like pool accounts and
additionally allow the direct transfer of fungible gold between members of the
service. Other operators, by contrast, allows clients to create a bailment on
allocated (non-fungible) gold, which becomes the legal property of the buyer.

Other platforms provide a marketplace where physical gold is allocated to the

buyer at the point of sale, and becomes their legal property.These providers are
merely custodians of client bullion, which does not appear on their balance sheet.

Typically, bullion banks only deal in quantities of 1,000 troy ounces (31 kg) or
more in either allocated or unallocated accounts. For private investors, vaulted
gold offers private individuals to obtain ownership in professionally vaulted gold
starting from minimum investment requirements of several thousand U.S.-dollars
or denominations as low as one gram.

7. Derivatives, CFDs and spread betting

Derivatives, such as gold forwards, futures and options, currently trade on various
exchanges around the world and over-the-counter (OTC) directly in the private

20
market. In the U.S., gold futures are primarily traded on the New York
Commodities Exchange (COMEX) and Euronext.liffe. In India, gold futures are
traded on the National Commodity and Derivatives Exchange (NCDEX) and
Multi Commodity Exchange (MCX).

As of 2009 holders of COMEX gold futures have experienced problems taking

delivery of their metal. Along with chronic delivery delays, some investors have
received delivery of bars not matching their contract in serial number and weight.
The delays cannot be easily explained by slow warehouse movements, as the
daily reports of these movements show little activity. Because of these problems,
there are concerns that COMEX may not have the gold inventory to back its
existing warehouse receipts.

Outside the US, a number of firms provide trading on the price of gold via
contracts for difference (CFDs) or allow spread bets on the price of gold.

Mining companies

Instead of buying gold itself, investors can buy the companies that produce the
gold as shares in gold mining companies. If the gold price rises, the profits of the
gold mining company could be expected to rise and the worth of the company
will rise and presumably the share price will also rise. However, there are many
factors to take into account and it is not always the case that a share price will rise
when the gold price increases. Mines are commercial enterprises and subject to
problems such as flooding, subsidence and structural failure, as well as
mismanagement, negative publicity, nationalization, theft and corruption. Such
factors can lower the share prices of mining companies.

The price of gold bullion is volatile, but unhedged gold shares and funds are
regarded as even higher risk and even more volatile. This additional volatility is
due to the inherent leverage in the mining sector. For example, if one owns a
share in a gold mine where the costs of production are US$300 per troy ounce
($9.6 per gram) and the price of gold is $600 per troy ounce ($19/g), the
mine's profit margin will be $300. A 10% increase in the gold price to $660 per
troy ounce ($21/g) will push that margin up to $360, which represents a 20%
increase in the mine's profitability, and possibly a 20% increase in the share price.
Furthermore, at higher prices, more ounces of gold become economically viable

21
to mine, enabling companies to add to their production. Conversely, share
movements also amplify falls in the gold price. For example, a 10% fall in the
gold price to $540 per troy ounce ($17/g) will decrease that margin to $240,
which represents a 20% fall in the mine's profitability, and possibly a 20%
decrease in the share price.

To reduce this volatility, some gold mining companies hedge the gold price up to
18 months in advance. This provides the mining company and investors with less
exposure to short-term gold price fluctuations, but reduces returns when the gold
price is rising.

Investment strategies

Fundamental analysis
Investors using fundamental analysis analyse the macroeconomic situation, which
includes international economic indicators, such as GDP growth
rates, inflation, interest rates, productivity and energy prices. They would also
analyse the yearly global gold supply versus demand.

Gold versus stocks

Dow/Gold Ratio 1968–2008

The performance of gold bullion is often compared to stocks as different

investment vehicles. Gold is regarded by some as a store of value (without
growth) whereas stocks are regarded as a return on value (i.e., growth from
anticipated real price increase plus dividends). Stocks and bonds perform best in a
stable political climate with strong property rights and little turmoil. The attached
graph shows the value of Dow Jones Industrial Average divided by the price of an

22
ounce of gold. Since 1800, stocks have consistently gained value in comparison
to gold in part because of the stability of the American political system. This
appreciation has been cyclical with long periods of stock outperformance
followed by long periods of gold outperformance. The Dow Industrials bottomed
out a ratio of 1:1 with gold during 1980 (the end of the 1970s bear market) and
proceeded to post gains throughout the 1980s and 1990s The gold price peak of
1980 also coincided with the Soviet Union's invasion of Afghanistan and the
threat of the global expansion of communism. The ratio peaked on January 14,
2000, a value of 41.3 and has fallen sharply since.

One argument follows that in the long-term, gold's high volatility when compared
to stocks and bonds, means that gold does not hold its value compared to stocks
and bonds:

To take an extreme example [of price volatility], while a dollar invested in bonds
in 1801 would be worth nearly a thousand dollars by 1998, a dollar invested in
stocks that same year would be worth more than half a million dollars in real
terms. Meanwhile, a dollar invested in gold in 1801 would by 1998 be worth just
78 cents.

Using leverage
Investors may choose to leverage their position by borrowing money against their
existing assets and then purchasing or selling gold on account with the loaned
funds. Leverage is also an integral part of trading
gold derivatives and unhedged gold mining company shares (see gold mining
companies). Leverage or derivatives may increase investment gains but also
increases the corresponding risk of capital loss if the trend reverses.

Taxation

Gold maintains a special position in the market with many tax regimes. For
example, in the European Union the trading of recognised gold coins and bullion
products are free of VAT. Silver and other precious metals or commodities do not
have the same allowance. Other taxes such as capital gains tax may also apply for
individuals depending on their tax residency. U.S. citizens may be taxed on their

23
 gold profits at collectibles or capital gains rates, depending on the investment
vehicle used.

Scams and frauds

Gold attracts a fair share of fraudulent activity. Some of the most common are:

• Cash for gold – With the rise in the value of gold due to the financial crisis of
2007–2010, there has been a surge in companies that will buy personal gold in
exchange for cash, or sell investments in gold bullion and coins. Several of these
have prolific marketing plans and high-value spokesmen, such as prior vice
presidents. Many of these companies are under investigation for a variety
of securities fraud claims, as well as laundering money for terrorist
organizations. Also, given that ownership is often not verified, many companies
are considered to be receiving stolen property, and multiple laws are under
consideration as methods to curtail this.
• High-yield investment programs – HYIPs are usually just dressed up pyramid
schemes, with no real value underneath. Using gold in their prospectus makes
them seem more solid and trustworthy.
• Advance fee fraud – Various emails circulate on the Internet for buyers or sellers
of up to 10,000 metric tonnes of gold (an amount greater than US Federal
Reserve holdings). Through the use of fake legalistic phrases, such as "Swiss
Procedure" or "FCO" (Full Corporate Offer), naive middlemen are drafted as
hopeful brokers. The end-game of these scams varies, with some attempting to
extract a small "validation" amount from the innocent buyer/seller (in hopes of
hitting the big deal), and others focused on draining the bank accounts of their
targeted dupes.
• Gold dust sellers – This scam persuades an investor to purchase a trial quantity of
real gold, then eventually delivers brass filings or similar.
• Shares in fraudulent mining companies with no gold reserves, or potential of
finding gold. For example, the Bre-X scandal in 1997.
• There have been instances of fraud when the seller keeps possession of the
gold. In the early 1980s, when gold prices were high, two major frauds

24
were International Gold Bullion Exchange and Bullion Reserve of North
America. More recently the fraud at e-Bullion resulted in a loss for investors.

Why Should You Invest in gold

Safety, liquidity, and returns are the three criteria most risk-averse investors look
for before investing. While gold meets the first two criteria without any hiccups,
it doesn’t perform poorly at the last one either. Here is why you should invest in
gold:

1) Investing in gold is worthwhile because it is an inflation-beating investment.

Over time, the return on gold investment has been in line with the rate of
inflation.

2) Gold has an inverse relation with equity investments. For example, if the
equity markets start going down, gold would perform well. Considering gold as
an investment option in your investment portfolio will be a buffer to the overall
volatility of your portfolio.

What are Gold Funds

By investing in gold funds, you invest in stocks of companies operating in gold

and gold-related activities. Gold mutual funds include silver, platinum, and other
metals in their investment basket. A mutual fund manager on behalf of an asset
management company manages the gold fund, unlike gold ETFs. They make use
of the fundamental trading analysis to buy and sell stocks to maximise returns for
investors. Returns from gold funds depend on market conditions to an extent.
Gold mutual funds eliminate the risk of returns considerably by distributing
investments over a wide range of investment options. In other words, mutual
funds work on the principle of diversifying, i.e. not putting all eggs in one basket.
Investors need to weigh their risk appetite and goals before choosing such a
mutual fund.

The Desire of Gold

Throughout history, gold has always been recognized as a valuable asset. Some of
the earliest records describe gold as being desired, both as an art form but also as
a form of currency. Since gold coins were first struck in around 550 BC, they

25
formed an important foundation to our monetary system. However, treasures
containing gold have been discovered which date back from as early as 4000 BC.
This means the relevance of this asset has been linked to power and wealth for a
considerable time. Even when countries moved away from gold coins and into the
convenience of paper money, the ‘gold standard’ meant that this paper currency
still retained an important link to gold.

The very nature of what makes gold precious is the rarity and scarcity of the
metal, something which has continued to fascinate people to this day. But just
how rare is gold? Consider this, gold is so rare that the world produces more steel
in an hour than it has poured gold since the beginning of recorded history!

It also has many uses. Over half of the gold used today is used for jewellery and
around 25% is used for coins and bars, but it also plays an important role in
industry. Technology is a big driver for gold demand, and alongside other
precious metals, it’s used in everything from smartphones to electric cars.

However, in a digital age where there are a multitude of ways to invest your
money, why does gold still remain an important foundation in the portfolio of any
savvy investor?

Why Invest in Gold?

Although people will have their own reasons to invest in gold, for many, gold
investment is about preserving and protecting their wealth.

In terms of wealth preservation, around £200 would have bought you an ounce of
gold towards the end of 1990. If you had bought an ounce of gold, and kept £200
as cash, the gold would now be worth around 650% more. However, the cash
would not have increased in value and, due to inflation, would actually be worth
less.

Similarly, many choose gold to protect the rest of their portfolio from risk and to
add diversity to their portfolio. Very few people would choose to invest all their
money in gold as it is always advisable to create a balanced portfolio containing
different types of investments. Many investors choose gold for that very reason,
allowing them to diversify into different areas. This is said to be because the price

26
of gold is usually negatively correlated to the stock markets; gold often rises
when other markets fall. This is why, traditionally, gold is seen as a ‘safe-haven’
investment. In times of market volatility, where stocks and shares plummet, part
of this decrease is due to investors moving away from ‘riskier’ assets into the safe
haven of gold.

Lastly, some investors choose gold because of the possible financial returns,
especially over a longer period of time. Put simply, if you buy it and hold it until
the price goes up, you can sell it – hopefully for a profit.

Digital Gold

If you are interested in investing in gold, but are not interested in physical
ownership, some choose to invest in Digi Gold. Apart from not being able to
physically touch or take delivery of the gold, the main difference between Digi
Gold and coins or bars is the costs to start investing are much lower. With coins
or bars, the initial purchase price is based on the cost of the smallest coin or bar
currently available. However, with Digi Gold, you can invest from as little as 24
rupees, and sell it back whenever you’re ready.

How Gold is Priced?

All forms of gold investment are priced in a similar way, as the price you are
charged is based on the ‘premium’ of the product. This is the percentage which is
charged for the product over the gold price of the metal which it contains. Due to
economies of scale, smaller products tend to cost slightly more to manufacture,
package and distribute than larger ones. This means that the premium on smaller
products tends to be more. So, even though a 1g gold bar would be cheaper than a
100g gold bar (because it contains vastly different amounts of gold) the actual
percentage charged on the smaller bar, over the price of the gold it contains, is
slightly higher. Put simply, it would be cheaper to buy a single 100g gold bar than
it would be to buy 100 x 1g gold bars. Even though you would get the same
amount of gold, as it costs more to manufacture 100 smaller bars, the company
charges a higher premium for them at the time of sale.

27
Similarly, as the costs to the retailer are less, digital products, such as Digi
Gold from The Royal Mint, carry a lower premium as the costs for the retailer to
store the product and distribute it digitally are less than those associated with
physical coins and bars

Selling Gold

Of course, with both coins and bars, at some point you may wish to sell them in
order to ‘liquidate’ your investment. One of the other benefits of gold is that it
doesn’t matter where you are in the world, or what gold product you own; there
will be a market for it. Gold is one of the few commodities which is truly
universally recognized and prized, and as such, you can sell it anywhere. Selling
your product usually involves the dealer weighing and authenticating the item and
offering you a price which is a percentage of the gold price within. Depending on
the individual dealer, this percentage will differ (sometimes greatly), so it is
important you request a price at multiple locations to ensure you are getting the
best possible price.

Whilst The Royal Mint is able to buy back gold through our ‘Sell Gold’ service,
if you store your gold at The Vault ®, you can sell it back at any time from within
your account. The choice is yours.

Invest in Gold Via Gold ETFs

Gold (ETFs) Exchange Traded Funds are units representing physical gold, which
may be in dematerialized form or paper form. These are open-ended funds that
trade on major stock exchanges. Investors can Buy Gold ETFs online and keep it
in their demat account. Here one gold ETF unit is equal to one gram of gold.
Benefits one of the major advantages of Investing in Gold ETFs is that it is cost
efficient. There is no premium like making charges attached to it. One can buy at
the international rate without any markup. Furthermore, unlike physical gold,
there is no wealth tax on Gold ETFs in India.

Benefits

One of the major advantages of Investing in Gold ETFs is that it is cost efficient.
There is no premium like making charges attached to it. One can buy at the

28
international rate without any markup. Furthermore, unlike physical gold, there is
no wealth tax on Gold ETFs in India.

E-Gold- Buy Gold in Electronic Form

One of the other gold investment options in India is e-gold. To invest here, one
should have a Trading Account with specified National Spot Exchange (NSE)
dealers. E-gold units can be bought and sold through the exchange (NSE) just like
shares. Here one unit of e-gold is equal to one gram of gold.

Benefits

Investors wanting to make a long-term investment can buy e-gold in small

quantities and keep it in their Demat account. Later, after achieving the target,
they can take the physical delivery of gold or can encash the electronic units.
Also, the transparency in pricing and seamless trading is one of the major benefits
of this product.

Invest in Three New Gold Schemes

The Government of India has recently launched three gold-related schemes,

namely- the Gold Monetization Scheme, Gold Sovereign Bond Scheme and the
Indian Gold Coin Scheme.

Gold Monetization Scheme

The Gold Monetization Scheme (GMS) works like a gold Savings Account,
which will earn interest on the gold that you deposit, based on the weight along
with the appreciation in the value of gold. Investors can deposit gold in any
physical form- bar, coins or jewellery. Investors would earn regular interest on
their idle gold, which not only encourages gold investment but also adds value to
savings too. The deposit term of this scheme i.e.- Short-term, mid and long term-
allows investors to achieve their Financial goals.

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Sovereign Gold Bond

The Sovereign Gold Bond scheme is an alternative to purchasing physical gold.

When people invest in gold Bonds, they get a paper against their investment.
Upon maturity, investors can redeem these bonds to cash or can sell it on Bombay
Stock Exchange (BSE) at the prevailing Market price. Sovereign Gold Bonds are
available in the digital & Demat form and can also be used as Collateral for loans.
Minimum investment under this scheme is 1 gram.

Indian Gold Coin

The Indian Gold Coin Scheme is one of the three gold investment options
launched by the Government of India. The coin is currently available in
denominations of 5gm, 10gm & 20gm, which allows even those with a small
appetite to buy gold. The Indian Gold Coin is the first national gold coin which
will have the face of Mahatma Gandhi on one side and the image of Ashok
Chakra minted on the other side. One of the most advantageous features of this
scheme is the ‘Buy Back’ option that it provides. Metals and Minerals Trading
Corporation of India (MMTC) offers the transparent ‘buy back’ option for these
gold coins through its own showrooms across India.

Gold Mutual Funds as a Gold Investment Option

Gold Mutual Funds are schemes that mainly invest in gold ETFs and other related
assets. Gold Mutual Funds do not directly invest in physical gold, but take the
same position indirectly by Investing in Gold ETFs.

Benefits

To invest in Gold MF, investors don’t need a Demat account. Also, here you are
not constrained to buy complete units, unlike in an Exchange Traded Fund. So if
you have INR 2000 to invest in gold you can buy units in a Gold Mutual Funds
but it would be insufficient for a unit of gold in an ETF. You have the option of

30
 systematic investment too, so you can buy for as little as INR 500 p.m. SIPs are a
good way to accumulate gold as an investment.

Gold Coins and Bullion

Buying gold in the form of bullion, bars or coins is generally considered to be one
of the popular gold investment options, especially for those who want to buy
physical gold. Since gold bars and bullion are made with a purest physical form
of gold, investors are more inclined towards Investing in gold in this form.

Benefits

The benefit of gold bullion is that it is easily recognisable and easy to find buyers.

A Detailed Insight into Gold Investments

Investments are an act of putting in money for further monetary gains and are
chosen after carefully evaluating on the basis of different factors from the
different investment options available in the market. The factors that one must
look at before investing is the safety, the liquidity, and the returns from the
investment instrument under the investment is being done.

Investments are classified into three basic categories. They are- ownership,
lending, and cash equivalents.

Ownership investments:

• It is the ownership of tangible/intangible asset

• There is a high risks factor and also a high profitability quotient
• Example: Real Estate, Stocks, precious metals etc.

Lending investments:

• They have a low risk factor and low return of investment

31
• They are a perfect choice for those unwilling to take huge risks but need an
investment option.
• Example: Bonds, bank accounts etc.

Cash Equivalents:

• These investments are equivalents to cash

• They have high liquidity and are ideal for short term investment
• For example: short-term government bonds, marketable securities etc.

What is Gold ETFs?

Let us first look at the meaning of ETF-Exchange Traded Funds. ETFs behave
like individual stocks (but with high liquidity) and are traded in a similar fashion.
Gold ETFs are an example for commodity assets with gold as the only chief asset.
Investing in gold ETFs is not investing in actual, physical gold, but in the cash
equivalents of the same. These investments are based on gold prices and help
invest in gold bullions.

Gold ETFs holdings are transparent because they are based on direct gold pricing.
Moreover, due to lesser additional charges, they are the closest to actual pricing
of gold. These investments are done through stock exchange, either through
National Stock Exchange or Bombay Stock Exchange with gold as the underlying
asset.

Features and benefits of ETFs:

• Major advantage of paper gold or Gold ETFs here is that its safety is better
ensured. They have a lower risk of theft.
• Small investments via SIP route instead of big amount investment can be availed.
A minimum of 1 gram of gold investment can be made.
• The gold acquired is in ‘demat’ form and hence, the purity of it doesn’t make
much of a difference.
• The direct prices ensure the transparency of ETFs obtained.

32
• Gold ETFs help with the taxes too; if held for more than 3 years the capital you
must have gained is subjected to 20% tax post indexation.

How to invest in them?

To invest in Gold ETFs, a trading account and a demat account has to be opened
with a stock broker. You can choose to invest and buy in lump sum or not. The
additional cost comprises of the expense ratio and broker cost. Expense ratio is
charged to manage the funds (of around 1%), whereas broker cost is for the
intermediaries- stock brokers.

What are Gold-Backed ETFs?

Gold backed ETFs are different from Gold ETFs on the basis of enjoying the
benefits of owning physical gold (as the name suggests ETFs that are backed by
physical gold). They facilitate access to ownership of physical gold along with its
properties and security, without having to arrange for insurance and storage
individually. They help track the price of gold and provide the flexibility of
owning physical gold at the convenience of stock market trading.

Features and benefits of Gold-backed ETFs:

• They are financial products that are regulated wherein a share corresponds to a
specific amount of gold. The funds are entirely backed up by physical gold.
• Gold backed ETFs require authorized stock brokers who exchange the shares for
physical gold.
• They combine the benefits of the sense of owning physical gold, but at the ease of
stock exchange and have no responsibility whatsoever for the gold’s safety. This
makes it a more attractive option than Gold ETFs.

How to obtain Gold-backed ETFs:

The way to invest in it is similar to that of Gold ETFs. Through a stock broker,
investors can purchase Gold-backed ETFs like stocks through stock exchange.
They can have these ETFs in possession in their custody account and sell them
whenever they wish.

33
What is E-gold?

E-gold abbreviated for Electronic-gold, is an electronic way of buying gold. They

are considered better than gold ETFs. They are cost effective as they have no
recurring management cost. E-gold came into the picture long after ETFs had
taken over the gold market.

However, in the recent times, E-gold has risen to the more preferred option.

Investments in gold coins and bullions

Gold coins and small gold bar account for among the highest ratio of gold
demand in India as this form of physical gold can be easily resold. The prices
vary between different parts of the world and the investment on physical gold
comes with challenging responsibilities of safeguarding it.

Features and Benefits of gold coins and bullions:

Majority of the investors prefer investing on bullions than coins as they are
available at a cheaper price.

At the same time, bullions have lesser sale ability factor than gold coins. Also,
reselling of gold coins can be easily done as they have multiple denominations
unlike bullion. The denominations for 24k gold are 10 grams, 8 grams, and 5
grams.

Safeguarding small gold coins and bullions are easier than other physical gold
items.

The price of premium bullion is subjected to market trend and bullions are
considered a hedge against inflations.

They can be purchased from nationalized or private sector bank, online (there is
no need for brokerage charge), a physical retailor etc.

34
 Features and benefits of gold in electronic form:

Electronic gold is more preferred because it is high in return. The cost of trading
E-gold is minimal as the NAV (Net Asset Value) is obtained after deducting the
asset management fee, storage, and the custodian charges.

There is a cost reduction in the absence of recurring management fee. This, in the
long run, becomes effective as the returns get positively affected by the reducing
costs.

On the downside, E-gold attracts wealth tax and the minimum number of years
for it to be considered long term is 3 years unlike Gold ETFs which is of 1 year.

Electronic gold can be converted into physical form and be delivered through
physical delivery. But this facility is not offered by all institutions.

How to go about procuring E-gold:

E-gold can be obtained from National Spot Exchange Limited (NSEL) as they are
in electronically demat form. NSEL provides investors the platform to purchase
E-gold and convert them to physical gold, if necessary, or directly sell them for a
profit.

Gold Mutual Funds as Gold investment option

Mutual funds are bought by pooling in money from many investors. This pooled
money is used to purchase units or shares of the funds. A gold mutual fund is an
investment in gold-bullion or gold producing companies. This is a convenient
way to get returns from investments made on gold and at the same time, to avoid
getting the capital affected from inflations or geo-political insecurities.

Features and benefits of gold mutual funds as an investment

option:

• One of the biggest advantages in comparison to aforementioned options is that a

Gold Mutual fund does not require demat accounts.

35
• The potential value of gold can be tapped into without the actual responsibilities
of safekeeping physical gold.
• Investment portfolios can be diversified through mutual funds. It can be started
with a monthly investment of just Rs. 1000.
• They are taxable as debt fund.
• They are better protected comparatively from price fluctuations, political changes
and inflations and therefore, are safer.
• Gold mutual funds can be used as collateral for bank loans.

Under physical gold investments, investments on gold coins and bullions are
notable. They are a better physical gold investment option than jewellery due
to multiple factors.

What are allocated gold accounts?

Allocated gold is gold owned by an investor under a safeguarding custody

arrangement with a professional gold bullion vault. This is when an investor buys
an amount of gold and allocates gold accounts for safekeeping. Unlike
unallocated gold, allocated gold is not a property of the bank. Allocated account
storage price is inexpensive because of the compact size of gold bullions. But it is
advisable to look for institutions that provide commercial gold bullion storage
unit which ensures cheaper allocation cost. This is because such institutions are
not in financing or lending activities and have no motivation to charge higher
than required.

How to buy gold biscuits in India?

One can buy gold biscuits with the help of these:

 Card/Cash/Cheques:
• A Jeweller outlet
• Banks

 Card/E-wallets (Paytm, Mobikwik, PhonePe)

• Online Jewellery website
• Amazon

36
• Flipkart
• Snapdeal etc.

To summarize, gold investment may not be an ideal investment because of its

competent returns. However, gold investment has its perks too. There are many
ways to invest in gold: physical, paper, and a combination of two. Each
investment type has its own pros and cons.

Make sure to assess factors such as the investment time period, purpose (to
increase gold investment portfolio etc.), budget, returns etc. before deciding. It is
important to look for what suits your personal requirement and avoid following a
certain investment trend.

Gold has been a symbol of wealth since ancient times and even in the Information
Age has managed to maintain its relevance as an investment. In its physical form,
currently, around 190,000 tonnes of Gold are available globally out of which 50%
is in the form of jewellery. An additional 17% and 13% of global gold reserves
are held by Central Banks around the world and used for various industrial
purposes respectively.

At present, the second most popular use of Gold worldwide that accounts for 20%
of the world’s physical Gold are investments. These are held by individuals in the
form of investments such as Coins, Bars, or as underlying assets of Gold
Exchange Traded Funds, Gold Mutual Funds, or Digital Gold.

In this blog, we will discuss the key Gold investment options currently available
in India and compare them based on key criteria such as availability, risk, return,
cost, liquidity, etc. But first, let’s discuss why investing in gold is relevant in
today’s world.

Why Should You Invest in Gold?

The primary reason for investing in Gold is portfolio diversification and in that
context, it is considered to be an ideal hedge against the potential volatility of
equity investments as well as inflation. Moreover, as shown in the chart below,
investments made in Gold have in most cases provided good returns over the past
40 years:

37
 Gold Investment Options in India

To invest in gold you either opt for the physical form or the digital form. In its
physical form, Gold as an investment can be held in the form of jewellery, coins,
bars i.e. bullion, etc. There are, however, a few key limitations of investing in
physical gold:

• Making/designing charges make purchase expensive

• Storage expenses are applicable due to security and insurance requirements

• Selling is inconvenient due to possible impurities and the requirement of

origination and purity certificates

To overcome the limitations of physical gold, you can opt for the digital route
which includes investments such as Digital Gold, Gold ETFs, Gold Mutual
Funds, and Sovereign Gold Bonds. The following is a short description of each of
these investment options:

1. Digital Gold: These can be purchased through various apps in denominations

starting from 1 gram onwards.

2. Gold ETFs: Gold Exchange Traded Funds are traded on stock exchanges just
like shares and primarily feature Physical Gold and stocks of Gold
mining/refining as the primary underlying assets. A Demat (Dematerialized)
Account is mandatory for investing in Gold ETFs.

3. Gold Mutual Funds: These are mutual funds managed by various asset
management companies (AMCs) that follow a fund of fund structure and
primarily invest in Gold ETFs. You can invest in most Gold Mutual Funds
through the ETMONEY App.

4. Sovereign Gold Bonds: These bonds are periodically released by the Reserve
Bank of India (RBI) and available for purchase through leading public and private
sector banks. While returns are pegged to price of gold and guaranteed by GOI,
they actually do not have physical gold as an underlying asset.

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Do keep in mind that while the performance of all the above examples of Gold as
an investment is linked to the price of Gold, there are significant differences
between them in terms of risk, returns, availability, liquidity, lock-in period, and
taxation. Let’s discuss these aspects of Gold investment options in detail starting
with risk.

Digital Gold lacks regulatory oversight because it does not have a regulatory
body such as SEBI or RBI as of yet. Moreover, there are currently only 3 players
who dominate this market in India – Augmont Gold, MMTC-PAMP India, and
Safe Gold, which also increases the overall risk of the investment.

Gold ETFs and Gold Mutual Fund share the same risk – market risk due to the
potential volatility of gold prices. This is because, in the case of both instruments,
the underlying asset is primarily Physical Gold. For example, Gold ETFs invest
either in Physical Gold or in the stocks of companies engaged in mining/refining
gold. Thus an increase or decrease in the price of Gold impacts the performance
of Gold ETFs. Gold Mutual Funds follow a Fund of Fund structure and primarily
invest in Gold ETFs thus Physical Gold and stocks of Gold mining/refining
companies become the underlying asset for these schemes. At present, both these
financial products are regulated according to the guidelines of SEBI.

The sovereign default risk applicable to Sovereign Gold Bonds is due to the fact
that this instrument is not backed by physical gold and is instead a derivative of
Gold issued by the Government of India through the Reserve Bank of India
(RBI). In this case, the Government uses the price of gold as a benchmark and
issues the bonds that guarantee periodic interest payments (at 2.5% p.a.) along
with investment value at maturity. A sovereign default in this case refers to a
situation where the Government of India is no longer able to make scheduled
repayments on its outstanding debt. This situation can typically occur when a
country’s debt levels are very high and there is a simultaneous economic
downturn in the country. But at the moment, there is very little chance of this
happening in India.

Next, let’s compare these investment options based on minimum investment

amount to determine their affordability for investors.

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Minimum Investment Requirements

The minimum investment requirement differs from one Gold investment option to
another and plays a key role in ensuring affordability, especially for new
investors. The following table sums up the minimum investment requirements for
different instruments:

Type of Gold Investment Minimum Investment Amount

Physical Gold ₹6,000 (approx.

price of 1gm gold
coin)

Gold ETF ₹5,000 (approx.

price of 1gm of
gold)

Sovereign Gold Bonds ₹5,000 (approx.

price of 1gm of
gold)

Gold Mutual Funds Starting at ₹100

Digital Gold Starting at ₹1

From the above table, you can see that the entry point when making investments
is lowest in the case of Digital Gold and Gold Mutual Funds while Sovereign
Gold Bonds, Gold ETFs, and Physical Gold require significantly higher minimum
investment amounts.

Comparison of Returns and Costs of Gold Investment Options

In case you are opting for gold as an investment, returns generated from the
investment are inversely correlated to the cost of making the investment i.e. lower
costs lead to higher returns and vice versa.

40
The reason for this is because the underlying asset is the same i.e. the price of
gold – an increase in price would lead to an appreciation of your investment,
while a decrease in price can potentially lead to a loss. The following are the costs
associated with each investmen.

Type of Gold Investment Key Costs (Approx)

Physical Gold • Design/Making Charges (10%)

• Insurance/Storage charges (3% to 4%

annually)

• GST (3% of purchase price)

Digital Gold • GST (3% of purchase price)

• Spread (approx. 6%)

Gold ETF Total costs of 0.5% to 1% annually inclusive of

• Expense Ratio

• Demat Account Charges

• Brokerage

Gold Mutual Total costs of 0.6% to 1.20% annually which include:

Funds 0.5% to 1% as Gold ETFs + (0.1% to 0.2% for
managing the gold)

Sovereign Gold No visible expenses

Bonds

In the cost section for Digital Gold, you will see the term “Spread”. This
“Spread” is the difference in the buying and selling price for the investor. In
practice, the price of buying Digital Gold is approximately 6% higher than the

41
selling price offered by platforms that sell Digital Gold. This spread is
implemented in order to recover costs associated with physical gold such as
secure vault storage cost, technology costs, hedging costs, insurance,
transportation cost, etc.

Sovereign Gold Bonds do not have any visible expenses primarily because they
are a derivative product guaranteed by the Government of India and not backed
by physical gold. In fact, there is currently a Rs. 50 per gram discount for online
purchase of these sovereign bonds. Moreover, this investment guarantees fixed
interest of 2.5% annually which is credited directly to the investor’s bank
account. In view of these factors, Sovereign Gold Bonds does seem to be the most
profitable way to invest in Gold. That said, just as in the case of other
investments, you do need to consider the aspects of availability which we will
discuss next.

Availability of Gold Investment Options

Availability refers to the ease with which an investor can purchase an investment
and also if there are any restrictions that might affect an investor’s ability to
invest in the product.

Gold Investment Option Availability

Physical Gold, Digital Gold, Gold ETFs, Readily available through applicable
and Gold Mutual Funds
channels ranging from

offline stores to mobile apps like

ETMONEY

Sovereign Gold Bond Released by the RBI periodically,

usually at intervals of 1-2 months

and the buying window is open for 5

days at a time.

42
 In most cases, Digital Gold, Gold ETF, and Gold Mutual Funds are readily
available for purchase through the appropriate channels. In this regard, Sovereign
Gold Bonds are a bit different – these bonds are released every 1 to 2 months by
the RBI and typically this buying window is open for 5 days. Apart from
availability, which determines how easily you can invest, you also need to
consider how easy it would be to liquidate i.e. monetize your investment, so we
will discuss this next.

Liquidity of Gold Investment Options

Liquidity with respect to investments typically refers to the ease with which they
can be converted to cash i.e. sold or redeemed.

1. Investments made into Physical Gold, Digital Gold, Gold ETF, and Gold Mutual
Funds can be bought and sold quite easily hence can be considered liquid
investments.

2. Sovereign Gold Bonds currently have a maturity period of 8 years, however, that
does not necessarily mean that the investment needs to be compulsorily held till
maturity. In case you want to redeem before maturity, you have 2 options.

One, you can do premature encashment of bonds after 5 years i.e. after
completion of the lock-in period for these bonds. In case you want to redeem your
investment before the completion of this 5 years period, you have the option of
listing and selling your Sovereign Gold Bond on the secondary market i.e. stock
market. This can be done at any time after the completion of 6 months from the
date of issue. However, typically this secondary market features low volumes, so
you might have to sell your bonds at a discount as compared to the market price
of Gold.

In case you are looking for an option to monetize your investment that does not
involve selling or premature encashment, you can opt for a loan against your
bonds. For example, the State Bank of India offers loans against Sovereign Gold
Bonds for amounts of up to 35% of the value of the bonds used as collateral. The
final factor that we need to consider in our evaluation is the taxation of gold
investment options and we will discuss this next.

43
Taxation of Gold Investment Options

Primarily the taxation of gold investments arises at the time of selling your
investment or at the time of maturity. Capital gains taxation rules are applicable
in the case of Physical Gold, Digital Gold, Gold ETFs, and Gold Mutual Funds.
Depending on the holding period of your investment i.e. the time period between
purchase and sale of your investments, either Short Term Capital Gains (STCG)
or Long Term Capital Gains (LTCG) rules may be applicable.

If the holding period of these investments prior to redemption/sale is up to 3 years

or shorter, the gains are classified as STCG. In this case, the gains will be added
to your taxable income for the applicable financial year and taxed as per the
income tax slab rate. In case you have held your Gold investment for over 3 years
prior to the sale/redemption, LTCG rules are applicable. Currently, LTCG on
physical gold, digital gold, Gold ETFs, and Gold Mutual Funds is calculated at
20% of capital gains with indexation benefit.

The taxation of Sovereign Gold Bonds works out a bit differently. There are 4
possible ways that your investment may be taxed and they are as follows:

Taxation on Interest: The interest earned from Sovereign Gold Bonds (currently
2.5% p.a.) is completely taxable. It is added to your taxable income for the
applicable FY and taxed according to the applicable slab rate.

Taxation on Premature Redemption: In case you prematurely encash your

investment after the completion of 5 years, the gains are completely tax-free. The
RBI typically offers redemption windows every 6 months after completion of the
5-year lock-in that can be utilized for completing the premature encashment.

Taxation on Maturity: In case you hold your Sovereign Gold Bonds till maturity
and encash them after completion of the 8 years holding period, your gains from
the investment will be tax-free.

Taxation on Stock Market Sale: In case you redeem your bonds through the
secondary market, you will be taxed according to the Capital Gains taxation rules
44
 discussed earlier. Thus either STCG or LTCG tax rate will apply to your
investment depending on the holding period of the bonds.

From the above discussion, you can see that each of these Gold investment
options comes with its own unique set of features and benefits. In the following
section, we will discuss our key takeaways as well as some key tips to help you
decide which one is most suitable for you.

Bottom line

After comparing the risk, minimum investment requirements, returns, costs,

liquidity, availability, and taxation rules of different Gold investment instruments
in India, the following are our key takeaways:

1. Investments in Physical Gold and Digital Gold are not recommended due to the
various risks associated with the investment as well as the significantly high buy-
sell spreads associated with these investments.

2. Sovereign Gold Bonds are the most suitable choice if you plan to stay invested
for a period of 5 years or longer. Not only will you receive regular interest
payouts while you stay invested, but you will also have the option of making tax-
free redemptions after staying invested for at least 5 years. Lastly, the redemption
of these bonds at maturity i.e. after completion of 8 years is also tax-free.

3. In case you are looking to stay invested in Gold for the short term i.e. no more
than 3 years, you can opt for Gold Mutual Funds or Gold ETFs, which have high
liquidity and availability.

One of India’s most popular investment options has historically been gold. It is
possibly the only investment that has held its value over time and never lost its
sheen. Inflation protection and portfolio diversification are the two main benefits
of investing in gold.

Today, there are numerous possibilities for investing in gold. It is no longer

restricted to purchasing gold jewellery, coins, or bricks.

45
Why should you consider investing in gold?

Safety, liquidity, and profitable returns are the most crucial factors for an investor
to build a stable portfolio. Gold is considered a safe haven investment.

Returns on gold investments are visible in line with inflation, regardless of the
rate. In short, it is an investment that outperforms inflation. Another essential
feature that encourages gold investment is liquidity. Irrespective of the type of
investment, gold can be sold easily because there are many takers for it.

How to Make Gold Investments

There are some traditional and contemporary forms of gold investment that you
can choose from. Traditionally, investment in gold was limited to buying physical
gold in the form of jewellery, coins, bars, or antiques. Investors now have more
options for investing, including gold funds and gold ETFs. The Reserve Bank of
India also offers Sovereign Gold Bonds (SGBs) as a viable investment option.

The main difference between buying gold through gold ETFs (Exchange Traded
Funds) and physical gold is that you don't buy physical gold. Instead of dealing
with the inconveniences of storing real gold, the gold you purchase stays in
Demat format. Contrarily, gold funds deal with funding investments in gold
mining firms. SGBs are a type of bond backed by gold.

Let's take a look at the difference between the fundamental gold investment
strategies:

Purchasing Gold ETFs

A Gold ETF is an investment tool that follows the price of the yellow metal and
enables investors to profit from it. A Gold ETF can be bought in the way equities
are purchased. These ETFs are easily accessible to anyone with a demat account
and are traded during open market hours.

The stock exchanges make public information about gold prices available. You
may check the gold price in real-time and adjust your trade decisions

46
appropriately. You can plan your entry and exit points better using this
information.

Acquiring Digital Gold

Purchasing digital gold is the easiest way to invest in gold without dealing with
the inconveniences associated with physical gold. Purchasing virtual gold is what
is meant by "digital gold." Since several platforms provide this service, buying
digital gold online is simple.

You can avoid the problem of figuring out the gold’s purity by purchasing digital
gold. There is always a possibility of fraud when purchasing gold from a local
market. Digital gold purchased from the aforementioned reputable businesses, on
the other hand, has a purity of 99.5 percent, or 24k gold. You can invest your
money without hesitation because these companies have government licenses.

Purchasing Gold Bonds

Gold Bonds, also known as Sovereign Gold Bonds or SGBs in India, are
government securities that replicate the price of actual gold. SGBs, first
introduced in 2015, have grown significantly in popularity as a substitute for real
gold investments. These investments have a high level of investor trust because
the government issues them.

Gold Mutual Funds

These mutual funds, primarily invested in gold ETFs, are managed by several
asset management companies (AMCs).

Benefits of Gold Investment in India

Portfolio Diversification

Your investment risk will be lower with a diverse portfolio. Include products in
your portfolio that do not have a high degree of correlation as you create your
savings plan. Investing in gold lowers your portfolio's overall risk and volatility.

47
 Hedge against Inflation

It would help if you considered how inflation might affect your returns while
making investments. Investing in gold protects against inflation. The value of a
currency decreases due to inflation. In India, inflation can occasionally be higher
than interest rates, resulting in a negative net return on investment.

Choose from a Variety of Options

You don't have to buy actual gold to invest in it. You could also decide to make
an online gold investment. Other asset classes are available for gold and physical
and virtual investments.

1. What should you select- gold jewellery or gold coins and bars?

The first thing you should know about is how to invest in gold. From an
investment point of view, physical gold in the form of gold coins and gold bars
prove to be a better choice. With gold jewellery, you are required to pay high
making charges. You are not required to pay such charges when you buy gold
coins and bars. Just make sure that you purchase gold from a reliable source to
ensure safety and quality.

2. Where to store your physical gold?

You’d mostly not keep something as expensive as gold at your home. To ensure
complete safety of your gold investment in India, you will have to use the locker
service of your bank. For using this service, you will be required to pay an annual
fee to your bank. But know that even banks do not take the responsibility of
things you keep in your locker.

3. Are there options other than physical gold?

Due to security reasons, a lot of people wanting to invest in gold now prefer
digital gold investment plan. For instance, there are now Gold ETFs which track
the price of physical gold. You can also find Gold Fund of Funds which tracks the

48
 price of Gold ETFs and other gold-related assets. Such schemes allow you to
invest in gold and benefit from the increase in price without purchasing physical
gold.

4. What are the benefits of investing in gold funds?

Apart from eliminating the need for you to purchase physical gold and spend
money on its security, there are other benefits of gold investment done through
gold funds. For instance, many AMCs offering such funds have SIP facility.
Moreover, you can also redeem your investment anytime you like.

Physical gold or gold fund?

If you compare physical gold and digital gold, you will see that the latter proves
to be a better investment option. It eliminates the need for you to worry about the
safety of your gold and enables you to invest with just Rs. 1,000 per month.
Evaluate the advantages of both the options to make a smart decision.

For generations, gold has been a valued commodity. It has been used as a
currency and has been considered as a symbol of the rich and powerful
throughout documented (and unrecorded) history. Gold’s long-term value
indicates its consistency and appeal across time. It is considered one of the safest
investments by investors, since it quickly recovers its value during economic
downturns. Its value frequently changes in the opposite direction of stock market
or economic movements.

When investor confidence is shaken, gold prices tend to rise as terrified investors
seek a safe place for money pulled from the market. Gold is also a safe haven in
times of inflation, since it retains its value considerably better than currency-
backed assets, which may grow in price but plummet in value.

Investors, thinking of investing in gold, can start by looking at the spot price of
gold, which is the current price at which it can be purchased and traded. The spot
price of gold in India is expressed in terms of 10 grams. For example, the price of

49
gold on Thursday, 3rd of February 2022, was INR 49,505. When looking at
historical gold prices, it is easy to notice that the price of this valuable metal
skyrocketed in the 2000s. According to the RBI, gold prices were, on an average,
at INR 12,889.75 per ounce in 2008. Due to investor demand in gold and
sentiment as the economy plunged deeper into crisis, gold prices rose to roughly
INR 25723.66 in 2011. By April 2020, gold prices had dipped somewhat from
over a decade earlier, but they had continued to perform well despite the
economic downturn.

In the late 1970s, a similar incident occurred. Following the global price surge in
the 1970s, gold fell in value for the next 20 years before rising again around
2000. During the pandemic crisis, demand for gold surged, and its price increased
as well. As we have stepped into 2022, investors are still unsure whether the
current rally will stay because it’s equally possible that the trend will continue or
that the price could decline for a long time. However, it is important to keep in
mind that while gold is languishing, not every investment will produce no interest
or dividends.

Investments in Gold

Buying gold is not the same as buying stocks or bonds. Anyone can acquire gold
coins or gold bullion (a bar-shaped piece of gold with a stamp) to take physical
ownership of it. The purity level and the amount of gold in the bar are stamped on
it. The value of bullion or coins is decided by the precious metal content of the
item rather than its rarity or condition, and it varies throughout the day. Various
banks, dealers, and brokerage organizations sell bullion and coins. There are also
gold mining company stocks, gold futures contracts, gold-focused exchange-
traded funds (ETFs), and other classic financial instruments available to invest
safely and securely in gold. Investors who purchase a gold-backed ETF are
purchasing shares in a trust that owns gold, but they have no claim to the gold
itself.

One can also invest in Digital Gold which gives the best of both worlds, exposure
to the gold prices without really holding the physical gold and options to convert
it into physical gold as and when required. There are also various gold saving

50
schemes managed by different jewellers where you can invest a certain amount
on a monthly basis and redeem it into gold jewellery at maturity with certain
discounts offered by jewellers. This route is especially useful for people who are
looking to buy jewellery in future for marriage or gifting purposes and can start
saving for them in advance. Lots of jewellers have started offering online options
for investing in such schemes, where customer can invest sitting at home.

One advantage of holding Gold as an asset is that it is relatively liquid compared

to other assets like real estate and can be easily monetized quickly, if needed,
either through a direct sale or taking a loan against it. However, it is important for
everyone to note that investing in gold with the expectation that it would never
lose value is not a fool proof idea. Gold, like any other financial asset or
investment, is subject to supply and demand pressures that cause price variations.
Hence, it is critical to consider all risks before investing in gold or any other
sector of the economy.

Best Time to Invest in Gold

Many gold proponents claim that it is a good way to protect yourself from rising
prices. The facts, on the other hand, refute this claim. In many cases, gold is a
greater hedge against a financial calamity than it is against inflation. During times
of crisis, gold prices tend to rise. However, this is not always the case when a rise
in inflation is seen. If a financial crisis or recession is on the horizon, investing in
gold may be a sensible option. However, if the economy is experiencing high
inflation, it may be advisable to hold off.

When it comes to investing for retirement, one needs an investment that either
generates current income or is predicted to appreciate in value over time, so they
can sell it and utilize the proceeds to fund their lifestyle. But it is not wise to
solely rely on gold as an investment for either of these goals.

Gold in the form of jewellery is not only used as wearable but also works as a
tool to tide over financial emergencies. So, buying gold has traditionally been a
financial support system over the years.

51
 There are ways of owning gold - paper and physical. You can buy it physically in
the form of jewellery, coins, and gold bars and for paper gold, you can use gold
exchange-traded funds (ETFs) and sovereign gold bonds (SGBs). Then there are
gold mutual funds (fund of funds) which further investment.

PHYSICAL GOLD

• Jewellery
Indians certainly cherish possessing gold. But owning it in the form of jewellery
has its own concerns about safety, high costs, and outdated designs. Then there
are the 'making charges', which could prove to be a costly affair. The making
charges on gold jewellery depends on the type of design and whether the
ornament is handmade or machine-made. If the design on gold jewellery is
intricate, then there will be high making changes.

• Gold Coins
Gold coins can be bought from jewellers, banks, non-banking finance companies,
and now even e-commerce websites. Gold coins and bars are of 24 karat purity
and 999 fineness carrying advanced anti-counterfeit features and tamper-proof
packaging. All coins and bars will be hallmarked as per the BIS standards.

• Gold savings schemes

To make gold buying more affordable, many jewellers have launched gold
savings scheme. A typical gold savings scheme allows you to deposit a fixed
amount every month for the chosen tenure. When the term ends, you can buy gold
(from the same jeweller) at a value that is equivalent to the total money deposited,
including a bonus amount. This conversion is done at the gold price prevailing on
maturity. In most cases, the jeweller adds a month's instalment at the end of the
tenure as a cash incentive.Some jewellers have waived making charges on the
gold bought from the amount deposited to make the scheme attractive.

52
Major Reasons for Investing in Gold

Like we mentioned above, gold has a lot of significance in Indian culture but we
are not talking of emotions here, in fact, financial investment is not a matter of
heart but Mind and thus, let us take a look at all the practical reason that make
gold a suitable investment medium over other options.

Simple and Easy to Liquidate

One of the major reasons for making any financial investment is that you consider
it as a backup if in case you need it in future and gold is one of the most of the
easy to liquidate the hard asset. In case you happen to be in need to use your gold
to make your ends meet, you just have to sell it to the buyer you prefer. There are
always buyers ready to buy the gold. But keep in mind the return rate is not
exactly what you expect, instead, it is opposite especially in the case of physical
gold, you get less than what you invest.

Proven Hedge Against Inflation

It has been tested time and again that gold provides a strong shield against
inflation. Gold rates remain almost unaffected at the time of inflation and
therefore, you do not have to suffer a loss when the inflation hits and even the
currency rates go down in the global market. Now, talking in the Indian context,
the value of Rupee has not been performing well in 2021 and therefore, investing
in gold is not a bad idea at all.

Wealth Creation

Gold is a precious metal and we all know that. As we have mentioned earlier,
gold holds a special place in any Indian household and is considered a wealth of
the family, for example, the gold jewels are passed on from one generation to the
other as a legacy and a symbol of family wealth.

53
Tangible Resource

Have you ever tried to invest in real estate or tried to make any financial
investment? If yes, then you must know that buying gold is much easier than real
estate or anything else. It is safe for the people who are trying to start doing
investments as very less risk is involved with the gold purchase.

Drawbacks of Investing in Gold

To find out exactly, if it is a good idea to invest in gold in 2021 lately, one must
consider the cons of it because you don’t only buy the pros, you buy the cons too
and thus, you should what are the downsides you will be facing by investing in
gold in 2021? Let’s have a look:

Poor Returns on Physical gold

Return rates of physical gold are never profitable if you invest in the gold
jewellery. The reason being that the price of jewellery is not only determined by
the gold rates but it also includes the making charges and this is the just the half
story i.e. when you purchase the gold. Now, when you sell the gold, the story is
totally different, the making charges are not considered and you get the money
only for the pure gold based on the gold rates of that particular day. Take for
example; the gold rate in Mumbai during December 2015 was 27000 Indian
rupees for ten grams of 24 karat gold and assuming that you bought a gold
necklace of 20 grams for about 60,000 Indian rupees which include the making
charges too. Now, due to some reason you want to sell it and you go to a shop
who quotes the price only for the gold that necklace contains and not for the
stones it has or the copper which weighs it down to only 13grams and the cost of
13 grams of pure gold in 2021 is only 40000 Indian rupees in 2021, obviously, it
is a loss deal for you and thus, poor return rates are one of the downsides to keep
in mind while investing in physical gold.

Summing Up

Investing in gold, whether real gold or gold-related instruments, is a difficult

decision that should be taken post thorough research. If you decide to acquire
actual gold, it is significant to make sure you deal with a reputable dealer. You’ll

54
need to work with a broker and a custodian if you want to buy gold for your
retirement account.

As a general rule, financial experts advise keeping gold to a tiny percentage of

your total assets. This is considered solid advice because it acts as a safety net. If
the value of all of your other investments plummets in a crash, then the value of
your gold should rise, thereby preventing you from losing everything.

The rich cultural history of India has seen gold as a part of common lives in the
form of coins, jewellery and other items. It was also an integral part of the royal
households as the precious metal has played an important role since many
decades. This proves how deeply invested Indians are with the yellow metal.

Gold in India is an investment option of substantial importance because of the age

old wisdom of collecting this precious metal being passed down through
generations. It is one among the only investment options highly used by the
womenfolk in India, irrespective of the financial background. Therefore, the
demand for gold products, mostly jewellery, in this nation is one of the highest in
the world.

Furthermore, gold investments in India are considered a safe option. The precious
metal holds emotional, sentimental, and religious value as well. Despite the
diverse cultural background and religious faiths, gold is used considerably in all
traditional celebrations, devotional festivals, and in wedding ceremonies.
Needless to say, it is collected dearly and passed down to newer generations as a
token of love.

People in this world can be divided broadly into two categories, one includes the
people who settle with whatever they have and the remaining are the people who
don’t settle but fulfil their dreams and needs one way or the other. The approach
for the latter group can be described by the statement that it is either my way or
the high way and this is a great optimal attitude as it keeps one motivated to work
and achieve all the goals and be able to buy all the luxuries of life. Well, a
majority of Indian population lives on a fixed income and couple that with the

55
fixed monthly expenditure, there is always almost a fixed amount of savings left
which is really not enough to buy the luxuries and live life to the fullest.

Therefore, one of the tools which are popular for this purpose is the financial
investment which allows a person to multiply his savings by investing it into one
of the multiple options available like mutual funds, real estate, gold etc.

Now, speaking of gold, it is easily the oldest form of currency in use on earth. It
was used by our ancestors centuries ago and is still used today, its mention can
even be found in the epics of Hindu mythology which highlights the position that
gold holds in the Indian and especially Hindu culture. It is considered as a carrier
of good luck and thus is gifted to the new brides and other important milestones
of life as well.

Now coming back to the point of financial investment, today, we will try and
answer the question that is it wise to invest in gold in 2021 or you should look
somewhere else. Also, if investing in gold is, in fact, a great way to go, then how
should one invest in gold? There are a lot of further subdivided questions that
arise when we head on the way to answer this question and we will try to cover
them all.

To keep the information simple and elaborate at the same time, we will start with
the basic and general info and then will make our way into more specific and
technical domain. One more thing, to make the discussion more informative we
will take up the example of gold rate in Mumbai and will stick to this to explain
the concepts whenever required. So, without any further ado, let’s jump right into
the discussion for today.

Like we mentioned above, gold has a lot of significance in Indian culture but we
are not talking of emotions here, in fact, financial investment is not a matter of
heart but Mind and thus, let us take a look at all the practical reason that make
gold a suitable investment medium over other options.

One of the major reasons for making any financial investment is that you consider
it as a backup if in case you need it in future and gold is one of the most of the
easy to liquidate the hard asset. In case you happen to be in need to use your gold
to make your ends meet, you just have to sell it to the buyer you prefer. There are
always buyers ready to buy the gold. But keep in mind the return rate is not

56
exactly what you expect, instead, it is opposite especially in the case of physical
gold, you get less than what you invest.

It has been tested time and again that gold provides a strong shield against
inflation. Gold rates remain almost unaffected at the time of inflation and
therefore, you do not have to suffer a loss when the inflation hits and even the
currency rates go down in the global market. Now, talking in the Indian context,
the value of Rupee has not been performing well in 2021 and therefore, investing
in gold is not a bad idea at all

57
 CHAPTER 2

RESEARCH METHODOLOGY

Meaning of Research

The word ‘Research’ is derived from the French word ‘Researcher’ meaning to
search back. Broadly research refers to a search for knowledge. Research is an
attempt to find answers to problems both theoretical and practical, through the
application of looking for facts through them broad principles or laws. Research
motivates a person to undertake critical evaluation and thinking. “Research is an
inquiry into the nature of, the reason for, and the consequences of any particular
set of circumstances, whether they are experimentally controlled or recorded as
they take place.” Research is an organized effort.

Precisely, research is also an academic exercise. It provides new findings based

on elaborate investigations. Research probes from known to unknown premises.
Hence, research is the search for knowledge through objective and systematic
approach to fine solution to a given problem.

Research is a continuous process. It helps to obtain knowledge about any natural

or human phenomena. Research plays two important roles firstly it adds to the
existing knowledge and secondly it helps to solve many complex problems.
Research involves blending of an enormous range skills and activities.

Definitions of Research –

Clarke and Clarke says “Research is a careful, systematic and objective

investigation conducted to obtain valid facts, draw conclusions and established
principles regarding an identifiable problem in some field of knowledge.

58
John .W. Best says “ Research is a systematic and objective analysis and
recording of controlled observations that may lead to the development of
generalizations, principles, theories and concepts, resulting in prediction for
seeing and possibly ultimate control of events.

Statement of Problem-

In Suburban Mumbai most of the investors invest in gold in the form of jewellery
which involves various constraints; includes high making charges, loss of
value, safety issue and storage/locker charges. The present study creates
awareness among investors in investing in various forms of gold investment.

Sources of Data-

This study is based on the Primary as well as Secondary data which is collected
by using structured questionnaire from a sample of 100 respondents and the
respondents include Housewives, Businessman, Engineers, Lawyers, Professors,
etc.

Primary data are collected through questionnaire survey. The questionnaire

consists of two parts. First part of the questionnaire consists of personal details.
Second part of the questionnaire consist of various variables like factors related to
investment in gold, investment options available to investor, profitability,
problems faced by the investor while investing in gold and investors attitude
towards investment.

Secondary data are collected from Articles, Reviews, Newspapers, Website,

Research papers, and booklets.

59
 Scope of the Research-

 To earn on your idle resources.

 To generate a specified sum of money for a specific goal in life.
 To make a provision for an uncertain future.

Objectives of the Research

 To Study The Attitude Of Investors Towards Investment In Gold.

 To Study About The Various Options Available To Investor While Investing In
Gold.
 To Study The Factors Influencing The Choice Of Investment In Gold.
 To Find Why People Give More Preference To Invest In Gold.
 To Identify The Reasons For Investment In Gold.
 To Identify Their Risk While Investing In Gold.

Hypothesis of the Research

Investments are made with a vowed objective of maximizing wealth. Investors

need to make rational decisions for maximizing their returns based on the
information available by taking judgments free from emotions. Demographic
factors influence the investors’ investment decisions. The investors preferred a
wait and watch policy for taking their decisions to most of the information and
they behaved in a rational manner. Investors are also cautious while analyzing
information.

Demographic factors like age and education have a significant influence on

investment decision making process. Selection of investments reveals emphasis
on familiarity, opinion and all demographic measures for all investment avenues.

Hence the hypothesis and Null Hypothesis is stated as follows:

H1 - There is no significant difference between the choice of investment and

gender of the investors. This hypothesis states that gender of investor has no

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difference in their choice making which implies that men and women have same
choice while choosing gold.

H2 - When it comes to investing in physical gold, it is totally unsafe. As it may be

stolen or even loosed either way it causes loss.

H3 - There is no significant difference among the investors of different age groups

and their investment choice. This hypothesis states that age of investor has no
difference in their choice making which implies that investors of different ages
have same choice while choosing gold.

H 4 - Gold is an asset which does not provide any regular or fixed income, where as
any investment made in mutual funds, real estate and stocks would generate
dividends and rents.

Factors That Influence Gold Prices

1. Monetary Policy/Fed Speak -

Perhaps the biggest influence on gold prices is monetary policy, which is
controlled by the Federal Reserve. Interest rates have a big influence on gold
prices because of a factor known as "opportunity cost." Opportunity cost is the
idea of giving up a near-guaranteed gain in one investment for the potential of a
greater gain in another. With interest rates holding near their historic lows, bonds
and CDs are, in some cases, yielding nominal returns that are less than the
national inflation rate. This leads to nominal gains but real money losses. In this
instance, gold becomes an attractive investment opportunity despite its 0% yield
because the opportunity cost of forgoing interest-based assets is low. The same
can be said of rising interest rates, which boost interest-bearing asset yields and
push opportunity costs higher. In other words, investors would be more likely
forgo gold as lending rates rise since they'd be netting a higher guaranteed return.

2. Economic Data-

Another driver of gold prices is U.S economic data. Economic data, such as the
jobs reports, wage data, manufacturing data, and broader-based data such as GDP

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growth, influence the Federal Reserve's monetary policy decisions, which can in
turn affect gold prices.

3. Supply And Demand-

It may be an oft-overlooked point, but simple supply and-demand economics can

influence physical gold prices as well. As with any good or service, increased
demand with constrained or low supply has a tendency to pull prices of that good
or service higher. Conversely, an oversupply of a good or service with stagnant or
weak demand can push prices lower.

4. Inflation-
Inflation is almost always a sign of economic growth and expansion. When the
economy is growing and expanding, it's common for the Federal Reserve to
expand the money supply. Expanding the money supply dilutes the value of each
existing monetary note in circulation, making it more expensive to buy assets that
are a perceived store of value, such as gold. This is why quantitative easing
programs that saw the monetary supply expand rapidly were viewed as such as
positive for physical gold prices.

Limitations to Invest In Gold-

Indians love to invest in gold on every possible occasion, but, many of them fail
to understand why gold is not the only ideal investment. In the past few years
gold has not given any returns or may have given negative returns. Indians have a
emotional attachment with ornaments, at the time of need, these sentiment act as
a hindrance.

1. No regular Income-

Gold is an asset which does not provide any regular income, where as any
investment made in mutual funds, real estate and stocks would generate dividends
and rents.

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2. Storage Issue-

If you believe in physical gold, storage is the biggest issue. If you place your
jewellery and coins in a bank locker one needs to rush each time when needed.
Moreover, one needs to pay the locker maintenance charges each year. If one go
for bank deposits one gets the recent returns based on the tenure.

3. Price Dictated By International Markets-

Many are not aware that Indian gold prices are influenced by the international
market. Any major movements internationally will impact Indian prices as well.
Dollar plays a vital role in gold prices. A stronger dollar would hurt gold
sentiments.

4. Gold Jewellery-

It is really bad idea buying gold jewellery as an investment. When we buy

jewellery we tend to pay making charges and wastage charges for the jeweller.
Based on the design the charges are increased. 22 karat is used in making
jewellery and when you sell the jeweller does not consider the making charge or
wastage.

5. Gold Coin Investing-

In gold coins and bars, means each time you need to sell, you get a lesser amount.
Also, banks do not buyback the gold coins and bars sold.

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 CHAPTER 3

LITERATURE REVIEW

It is a Study on “Gold Discovered in California January 24” on 1848

Many people in California figured gold was there, but it was James W. Marshall
on January 24, 1848, who saw something shiny in Sutter Creek near Coloma,
California. He had discovered gold unexpectedly while overseeing construction
of a saw mill on the American River.

Another builder, James S. Brown, heard Marshall say, "Boys, I have got her
now." Brown stepped over to Marshall, who held his hat in his hand. There in the
hat were 10 or 12 pieces of gold.

People had made false claims before that they had discovered gold, so it wasn't
until December of 1848, when President James Polk backed up the discovery, that
the Gold Rush began.

Gold was first discovered as shining, yellow nuggets. No doubt it was the first
metal known to early hominids. Gold became a part of every human culture. Its
brilliance, natural beauty, and lustre, and its great malleability and resistance to
tarnish made it enjoyable to work and play with.

The thought of becoming rich from picking up gold nuggets from the ground was
like hoping to win the lottery! In 1849, prospectors came from everywhere to try
to make their fortunes. They became known as the "forty-niners." More than

64
100,000 people arrived in California, but the gold was harder to find than people
realized.

Where does gold come from

Gold is the easiest of the metals to work. It occurs in a virtually pure and
workable state, whereas most other metals tend to be found in ore-bodies that
pose some difficulty in smelting. Gold’s early uses were no doubt ornamental,
and its brilliance and permanence (it neither corrodes nor tarnishes) linked it to
deities and royalty in early civilizations.

Gold has always been powerful stuff. The earliest history of human interaction
with gold is long lost to us, but its association with the gods, with immortality,
and with wealth itself are common to many cultures throughout the world.

Early civilizations equated gold with gods and rulers, and gold was sought in their
name and dedicated to their glorification. Humans almost intuitively place a high
value on gold, equating it with power, beauty, and the cultural elite. And since
gold is widely distributed all over the globe, we find this same thinking about
gold throughout ancient and modern civilizations everywhere.

World Gold Council (2019) conducted a study on “Gold is third most

consistently bought investment globally” According to World Gold Council
their significant piece of research, with an 18,000-strong sample, looks at a range
of markets including China, India, North America, Germany and Russia, and
highlights unique insights into attitudes towards and perceptions of gold; how and
why people buy gold, and also their reasons for not buying. In addition, the new
research reveals that more than a third (38%) of retail investors and fashion
enthusiasts have never bought gold in the past but are warm to the idea. This
shows a huge potential for the gold market to grow if untapped sources of
demand can be converted. The Study concludes that two issues need to be
addressed to engage with these potential gold buyers: trust and awareness. This
market can flourish if we can build trust across the broad spectrum of gold
products being sold and raise awareness around the positive role gold can play in
protecting people’s wealth.

65
Martin Surya Mulyadi (2012) conducted a study on “Gold versus stock
investment: An econometric analysis” According to Martin Surya Mulyadi his
Objectives are Investment defined as idle money which is put away for future use
(Tyson, 2011). There are a lot of investment instruments in which investors could
invest their idle cash including stocks, bonds, mutual funds, real estate, foreign
currency, or gold. The Study concludes that the result from this study showed that
the gold investment is quite safe for the investors and could be categorized as safe
haven. This conclusion is also supported by the previous research that identified
gold as a good portfolio diversifier and a hedge against stocks as well as a safe
haven in extreme stock market conditions. When stock investors in loss, gold
return tends to increase. While when gold return increases, it gives linear impact
to the stock return.

Aghila Sasidharan (2015) conducted a study on “Gold as an Investment

Option – A Study on Investment Pattern of Investors in Kerala” Her
Objectives states that the study is subjected with the following limitations: The
scope of the study is limited to only three different regions in Kerala. It will affect
the size of sample. 2) Some respondents may be biased it would affect the
accuracy of result. 3) Shortage of time. It concludes this research we can
understand about the attitude of the investors towards gold and also there are
different ways to invest in gold

Mohd Fahmi Ghazali (2014) researched a report on “Sharia compliant gold

investment in Malaysia: Hedge or safe haven” According to Mohd Fahmi
Ghazali his Objectives are Depending on the prevailing situations, any type of
gold investment account can fall into a number of rulings. First, unlawful and
void if the gold does not exist or it is not yet owned by the bank and will only be
bought from a third party in another separate transaction. Second, permissible and
valid when the two conditions are met, that is, when the bank rightfully owns the
gold at the point of sale and the bank issues a proof of purchase in the form of
physical gold or certificate to the customer and thus immediately gives the
customer the rights to manage. He concludes this paper empirically examines the
hedge and safe haven characteristics of gold investment that complies with Sharia
principles in Malaysia. In general, we find that domestic gold acts as a hedge

66
against domestic stock but performs poorly as a safe haven during extreme
market conditions.

Dr M Nishad Nawaz (2013) conducted “A study on various forms of gold

investment” their Objectives are to study the various options available for
investors in gold investment. To study the investors awareness on various forms
of gold investment. To study the pros and cons of various forms of gold
investment. To assist in creating awareness among investors on various gold
investment. It concludes that in this modern scenario, central banks of all
countries hold the expensive metals to assure re-payment of foreign debts,
regulates inflation and reflects the financial strength too. The reduced thickness of
alloyed gold is required to have a more noteworthy holding scope than the
ordinary alloyed metallization in the arrangement of ultrasonic aluminum wire
bonds.

Vanitha S., Saravanakumar K. (2019) conducted a study on “The usage of

gold and the investment analysis based on gold rate in India”. Their
Objectives are from the ancient days the value of the precious metal remains high
in-spite of the economic and financial crisis at different period. From the past few
years value of currency is fluctuating based on the foreign exchange market,
crude oil price and inflation; likewise, gold rate also is instable. By predicting the
rate of gold is not only to give hope to the people also to safeguard the money
at this scenario as its value is fluctuating drastically. It concludes that since
the earliest of time Gold is the natural resource; considered as the most popular
mineral. The colour of the pure gold is bright golden yellow. Gold nugget is
usually 70 to 95 percent gold, and the reminder mostly are silver and copper; but
the greater the silver content, the whiter its colour is. The main aim and intention
of this research is to predict the rate of gold in near future. Few papers have
proved that gold rate can be prophesied depending on the previous value.

Kozhikode District Shobha C. V. (2017) Studies On “Gold as A Safer

Investment Alternative among Small and Medium Investors with Special
Reference”

The Objectives of this study states that 1) to find whether Gold investment is
safer than other alternative investments like stock and government bond in the

67
present economic situation. 2) To find the factors influencing the small and
medium investors on the decision to invest in gold or not. 3) To find out factors
influencing the decision on the kind of gold investment they make. It Concludes
that This project investigates ‘gold as a safer investment alternative among other
investment’ by conducting a risk and return analysis of gold prices, stock index
and bond yield for a period 1st quarter of 2012- 1st quarter of 2017. The model
was estimated to understand the daily volatility between the daily gold prices,
daily stock index, and bond yield.

Lujia Wang (2011) conducted a study on “Investment in Gold an Empirical

Study of the Gold Return from 90s to 21st.” The Objectives of the study are to
be able to make a good investment on gold, it is necessary to identify the relevant
factors that affect the price of gold, and then construct an optimal portfolio of the
financial assets, including gold investments, stocks and bonds before and during
the financial crisis. It concludes is Based on the results, the return of gold is
proven to have a positive correlation with the change of inflation rates, but not
related to the change of interest rate and the return of stocks. The return of oil to
some extent is positively related to the return on gold. In sum, an investor should
add gold to the investment portfolio as, gold can diversify the risks of stocks and
bonds, and therefore, enhance the portfolio‘s ability of bearing risks in the crisis.

Barrend Pule (2013) conducted a study on “Evaluation of Gold as an

Investment Asset: The South African Context” The Objectives of the study are
1) Assess the abnormal return derived from investing in gold overtime. 2)
Compare the performance of gold investment instruments to the performance of
other instruments such as shares for JSE listed companies. 3) Assess whether the
inclusion of gold in the portfolio increases or decreases portfolio risk. He
concludes this study explores potential benefits of investing in various gold
investment vehicles in terms of risk and return. In addition, the study investigates
the relationship between gold and South African macroeconomic variables. There
are various gold investment vehicles such as New Gold ETF, Krugerrands and
stocks of gold mining companies which are available to South African investors.
Abnormal returns and value added monthly index were determined to assess the
return on various gold instruments over a period of time.

68
 CHAPTER 4

DATA ANALYSIS AND INTERPRETATION

Below Table 4.1 Showing Respondent of Gender Information

Male 56

Female 44

Pie Diagram 4.1

Interpretation-

Above Pie Diagram Showing the number of Male and Female Responded on my
survey in Suburban Mumbai on researching about Gold as an investment option.
The Number of Female Respondent are 44 and Male Respondent are 56. After
Analyzing the Data Male respondent are more than Female Respondent.

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 Below Table 4.2 Showing Respondent of Age

25 – 30 years 34%

31 – 35 years 13%

36 – 40 years 10%

41 – 45 years 16.5%

46 years & Above 25.80%

Pie Diagram 4.2

Age

25 - 30 years 31 - 35 years 36 40 years 41 - 45 years 46 years & above

Interpretation-

Above Pie Diagram Showing the Age Category of Responded People on my

survey in Suburban Mumbai on researching about Gold as an investment option.
In Age 25 - 30 years 34% of people had been responded, In Age 31 – 35 years
13% of people had been responded, 35 – 40 years 10% of people had been
responded, 41 – 45 years 16.5% of people had been responded, 46 years & above
25.80% of people had been responded. By this I found 25-30 years category
responders are more compared to other age categories.

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 Below Table 4.3 Showing Respondent of Annual Income

Rs. 2,00,000 – Rs. 3,00,000 64.5%

Rs. 3,00,000 – Rs. 4,00,000 14%

Rs. 4,00,000 – Rs. 5,00,000 9.7%

Rs. 5,00,000 & Above 11.8%

Pie Diagram 4.3

Annual Income

Rs. 2,00,000 – Rs. 3,00,000 Rs. 3,00,000 – Rs. 4,00,000

Rs. 4,00,000 – Rs. 5,00,000 Rs. 5,00,000 & Above

Interpretation-

Above Pie Diagram shows the Annual Income of the survey took for Gold as an
investment option in Suburban Area. The category is from Rs. 2,00,000 – Rs.
3,00,000 are 64.5%, Rs. 3,00,000 – Rs. 4,00,000 are 14%, Rs. 4,00,000 – Rs.
5,00,000 are 9.7% and Rs. 5,00,000 & Above are 11.8% people. According to
my survey the average Annual Income of people is from Rs. 2,00,000 – Rs.
3,00,000 who is investing in Gold in Suburban Mumbai.

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 Q.1. State the % of your Savings invested in Gold?

Less than 15% 50%

15% - 20% 30.2%

20% - 30% 14.6%

30% & Above 5.2%

Below Diagram 4.4 Showing Respondent of above Question

Interpretation-

Above Pie Diagram shows the % of Savings Invested in Gold for Gold as an
investment option in Suburban Area. The category included are Less Than 15%
are 50%, 15% - 20% are 30.2%, 20% - 30% are 14.6%, and 30% & above are
5.2%. According to this survey I think people from Suburban Mumbai invest their
savings in Gold is Less than 15% from their actual Gold are more, because in my
survey 50% of the people invests less than 15%.

72
 Q.2. What was the amount you spend on your last Gold Purchase?

Below Rs. 10,000 33%

Rs. 10,000 & Above 67%

Below Diagram 4.5 Showing Respondent of above Question

Interpretation-

Above Pie Diagram shows the amount that the people spend on their last Gold
Purchase. The people who took Gold below Rs. 10,000 are 33% and the people
who took Gold Rs.10000 & above are 67%. According to my survey people took
Gold is Above Rs. 10,000 are more.

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 Q.3. For what purpose you buy Gold Jewelry?

As accessory for wearing 62.9%

For Gift 20.6%

For Investment 16.5%

Below Diagram 4.6 Showing Respondent of above Question

Interpretation-

Above Pie Diagram shows for what purpose people buy Gold. The category are
as accessory for wearing are 62.9%, For Gift are 20.6% and for investment are
16.5%. According to my survey the people who took gold jewelry as for their
own purpose are more in Suburban Mumbai.

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 Q.4. Have you made any kind of Investment in Gold?

Yes 23.7%

No 76.3%

Below Diagram 4.7 Showing Respondent of above Question

Interpretation-

Above Pie Diagram shows that the people made any kind of Gold Investment are
not. According to my Survey Many People are not investment in Gold.

75
Q. 5. If answer to the above question is Yes, What kind of investment in Gold
have you made?

Gold Certificates 5.3%

Gold Accounts 13.7%

Gold Stock 9.5%

Gold Mining Shares 0%

My answer was No 70.5%

Below Diagram 4.8 Showing Respondent of above Question

Interpretation-

Above Pie Diagram shows that what kind of investment people made in Gold.
Like Gold Certificates are 5.3% Gold Accounts are 13.7% Gold Stock 9.5% Gold
Mining Shares 0%, but according to my survey many people are not invested in
any kind of Gold Investment.

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 Q.6. How often you visit a Jewelry Shop?

Weekly 0%

Monthly 8.1%

Yearly 34.3%

Occasionally 56.6%

Below Diagram 4.9 Showing Respondent of above Question

Interpretation-

Above Pie Diagram shows that When people visits Jewelry Shop. Like Weekly
visitors are 0%, Monthly visitors are 8.1%, Yearly visitors are 34.3% and
occasionally are 56.6%. So according to my survey people visit Jewelry Shop are
occasionally are more.

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 Q.7. How do you pay their Labor Charges?

In term of Cash 76.3%

In term of Gold 23.7%

Below Diagram 4.10 Showing Respondent of above Question

Interpretation-

Above Pie Diagram shows that how people used to pay their labor charges in
terms of cash or in terms of money. People who pay their labor charges in terms
of Money are 76.3% and who pay in terms of gold are 23.7%. According to my
survey People who pay their labor charges in terms of Cash are more.

78
Q.8. When buying a gift for someone, how likely are you to purchase jewelry
for them?

Never 20.2%

Very Rarely 39.4%

Sometimes 32.3%

Quite Often 10.1%

Every time 15%

Below Diagram 4.11 Showing Respondent of above Question

Interpretation-

Above Pie Diagram shows that how likely people purchases jewelry as a gift for
someone. Never 20.2% Very Rarely 39.4% Sometimes 32.3% Quite Often 10.1%
every time 15%. According to my survey people very rarely buys gold jewelry as
a gift.

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 Q.9. Do you import Gold from other countries too?

Yes 27.3%

No 72.7%

Below Diagram 4.12 Showing Respondent of above Question

Interpretation-

Above Pie Diagram shows that Do anyone import Gold from Countries or not.
According to my survey people who import Gold from other Countries are 27.3%
and who does not import gold from other countries are 72.7%. So mostly people
do not import gold from other countries.

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 Q.10. How do you buy and shop for Gold?

Online 4.2%

Going out Shopping 67.3%

Market 24.5%

Through Social Media 5%

Below Diagram 4.13 Showing Respondent of above Question

Interpretation-

Above Pie Diagram shows that how people buy their gold. In the form of Online
4.2% going out for Shopping are 67.3% In Market 24.5% In Social Media 5%.
According to my survey people who go out for shopping to buy Gold are more.

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 Q.11. What is your main Objective for Making Investment in Gold rather
than any other form of Investment?

It is secure 62.2%

More value than Financial 26.5%

Instruments

This investment is not 11.2%

affected by market face

Below Diagram 4.14 Showing Respondent of above Question

Interpretation-

Above Pie Diagram shows that why people chooses Gold rather than to make in
other form of investments. Because Gold is Secure 62.2% More Value than
Financial Instruments 26.5% This Investment is not affected by market face
11.2%. According to survey people invest in Gold only because it is Secure.

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 Q.12. Which is better Investment?

Gold 92.9%

Silver 7.1%

Below Diagram 4.15 Showing Respondent of above Question

Interpretation-

Above Pie Diagram shows that which investment is better. Whether Gold or
Silver, In Gold 92.9% In Silver 7.1%. According to my survey Most of them
chooses Gold is a better Investment.

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 Q. 13. How Much % of your investments deal in Gold Futures?

Less than 25% 58.2%

25% - 50% 27.6%

50% - 75% 8.2%

Greater than 75% 6.1%

Below Diagram 4.16 Showing Respondent of above Question

Interpretation-

Above Pie Diagram shows that how much % did everyone invest in Gold Futures.
Less than 25% are 58.2%, 25% - 50% are 27.6%, 50% - 75% are 8.2% and
Greater than 75% are 6.1%. According to my survey less than 25% of people are
invested in Gold Futures.

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 Q. 14. How much Gold Investment is Risky?

Less than 25% 17.3%

25% - 50% 26.5%

50% - 75% 34.7%

Greater than 75% 21.4%

Below Diagram 4.17 Showing Respondent of above Question

Interpretation-

Above Pie Diagram shows that how much Gold Investment is Risky? Less than
25% are 17.3%, 25% - 50% are 26.5%, 50% - 75% are 34.7% and Greater than
75% are 21.4%. According to my survey people says that Gold is Risky 50/% -
75%.

85
 Q.15. How do you rate the returns in Gold ETFs?

Very High 26.5%

High 19.4%

Moderate 33.7%

Low 14.3%

Very Low 6.1%

Below Diagram 4.18 Showing Respondent of above Question

Interpretation-

Above Pie Diagram shows that in Gold ETFs How much rate of returns are. Very
High 26.5%, High 19.4%, Moderate 33.7%, Low 14.3%, Very Low 6.1%.
According to my survey people thinks that its moderate rate of returns in Gold
ETFs.

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 Q.16. What is your Goal with Gold Investment?

Inflation Protection 59.1%

Portfolio Diversification 21.5%

Preparing for the worst 19.4%

Below Diagram 4.19 Showing Respondent of above Question

Interpretation-

Above Pie Diagram shows that what the people Goal in Gold Investment.
Inflation Protection are 59.1%, Portfolio Diversification are 21.5%, and Preparing
for the worst are 19.4%. According to my survey People are investing in Gold for
Inflation Protection.

87
 FINDINGS

In Researcher’s findings she think that Suburban Mumbai people are not
interested to invest in Gold. South India People Mostly prefers to invest in Gold
the place like Tamil Nadu they mostly invest in Gold. But not the suburban area
people.

Jewellery continues to be predominant form of investment in gold as per findings

of this study. Other forms of investment in, such as, gold bullion bars, gold coins,
gold certificates, and ETF are also making their way forward. These findings fall
in line with empirical observations made by my survey. In this study in Suburban
Mumbai I concluded that traditional form of investment is jewellery continue to
be predominant among all other forms of investment in gold.

Researcher also observed that there is lack of awareness about different

aspects of investments and forms among respondents. As per my study of
investor’s attitude concluded that there is lack of awareness about the new
trends in gold investment alternatives i.e. Gold ETF, E-Gold and Gold Funds.
Gold is also considered as an economic asset and security which can be used by
the

Couple during hard financial crisis. There is no denial that a few also invest in
diamonds, platinum and silver. But so far nothing has replaced importance of
gold jewellery. Investment in mutual funds and futures and options forms of
investment in gold is associated with high degree of risk and fear of lose.
Despite high exposure, futures and options form of investment in gold carries
high degree of risk.

Researcher found that the Age Category of 25 – 30 years are likely to invest in
Gold. The Annual Income from Rs. 2, 00,000 – Rs. 3, 00,000 of people are
investing in Gold. According to the Survey conducted in Suburban Area people
feel to invest in Gold because they feel secure and also it is Inflation Protection.
They also said it is Risky because Gold Price may decrease in Future. As
compared to Silver everyone feels good to Invest in Gold as it has more returns.
And everyone prefers to take Gold in Shop and not even imported from other
countries. Many people takes Gold for Gift or for self-wearing occasionally.

88
According to Diagram 4.4 shows the % of Savings Invested in Gold for Gold as
an investment option in Suburban Area. The category included are Less Than
15% are 50%, 15% - 20% are 30.2%, 20% - 30% are 14.6%, and 30% & above
are 5.2%. According to this survey I think people from Suburban Mumbai invest
their savings in Gold is Less than 15% from their actual Gold are more, because
in my survey 50% of the people invests less than 15%. According to Diagram 4.5
shows the amount that the people spend on their last Gold Purchase. The people
who took Gold below Rs. 10,000 are 33% and the people who took Gold
Rs.10000 & above are 67%. According to my survey people took Gold is Above
Rs. 10,000 are more. According to Diagram 4.6 shows for what purpose people
buy Gold. The category are as accessory for wearing are 62.9%, For Gift are
20.6% and for investment are 16.5%. According to my survey the people who
took gold jewelry as for their own purpose are more in Suburban Mumbai.
According to Diagram 4.7 shows that the people made any kind of Gold
Investment are not. According to my Survey Many People are not investment in
Gold. According to Diagram 4.8 people are not invested in any kind of Gold
Investment. According to Diagram 4.9 people visit Jewelry Shop are occasionally
are more. According to Diagram 4.10 People who pay their labor charges in terms
of Money are 76.3% and who pay in terms of gold are 23.7%. According to my
survey People who pay their labor charges in terms of Cash are more. According
to Diagram 4.11 people very rarely buys gold jewelry as a gift. According to
Diagram 4.12 people who import Gold from other Countries are 27.3% and who
does not import gold from other countries are 72.7%. So mostly people do not
import gold from other countries. According to Diagram 4.13 people who go out
for shopping to buy Gold are more. According to Diagram 4.14 people invest in
Gold only because it is Secure. According to Diagram 4.15 most of them chooses
Gold is a better Investment. According to Diagram 4.16 less than 25% of people
are invested in Gold Futures. According to Diagram 4.17 people says that Gold is
Risky 50/% - 75%. According to Diagram 4.18 people thinks that its moderate
rate of returns in Gold ETFs. According to Diagram 4.19 People are investing in
Gold for Inflation Protection.

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 RECCOMENDATIONS

The survey predicts according to the Q.4 Mostly People are not Interested to
invest in Gold And in Q.14 they feel like it’s very Risky to invest in Gold.

So researcher recommends that Gold is a safe investment option in a situation of

deflation. In a situation of low inflation, gold can act as a store of value as bank
deposits will generate low return. With reducing inflationary pressure, lending
rate goes down. However, banks offset the low interest income by reducing
deposit rate as they have to maintain Net Interest Margin. So in my opinion this it
is the right time to invest in gold.

Now on the basis of above findings we can conclude and recommend that this is
the right time to invest in gold. Besides Bank FDs, Investors have a revealed
preference towards Gold as a viable investment avenue. Gold remains a favorable
investment avenue in India.

There are some limitations for investing in gold like No regular Income, Storage
Issue, and Price Dictated by International Markets. So For all people it’s not good
to invest in Gold, But for the people whose income is good they can invest in
Gold without any problem. Because by observing last 2 years record Gold price
has not decreased so by investing in Gold in future we will get profit only.

There might have some disadvantages but still at last we are going to get profit by
investing in Gold. In suburban Mumbai People are not that much interested to
invest in Gold. According to my survey people are less invested and known about
Gold terms.

There are various reasons why people, especially Indians, invest in gold to meet
their financial goals. However, there are those that invest in gold for the wrong
reasons.

By doing this, they end up with an unsuitable investment product which can put
their financial goals in jeopardy. Here are few reasons why one should have gold
investment because it is a tangible asset it is a never changing asset.

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If you are a beginner to investing in gold, you should buy hallmarked gold in
India. This is because hallmarked gold is essayed and there is a stamp of
authenticity on the purity of gold.

Hallmarking means the Bureau of standards certified centers assure you on the
purity of gold. At the moment there are very few hallmarking centers in the
country. There is an ongoing demand to increase these centers.

The important thing to look when hallmarking of gold is the logo of the
hallmarking center and the year on which the hallmarking was done.

The Supreme Court has held that the husband or the in-laws who may be in
possession of such property or jewelry, only hold such articles in trust and cannot
claim ownership.

When the girl is sent away in marriage to a strange home, she takes her share of
the paternal property, legally recognized as streedhan. This includes jewelry and
gifts given by her parents, relatives and others on the occasion of her marriage,
and she has the right to this property at all times.

Over time, women have become economically independent and secured their
lives with their profession and income, but the practice of giving gold to the
daughter persists, and represents a large portion of gold bought in most
households. To live independent also we need to invest in Gold. Later on it will
help them a lot. What is forgotten is that the legal definition of streedhan includes
any movable or immovable property, and gold is only one of the traditional ways
in which it is offered. There are lots of schemes available to invest in Gold like
Gold Coins, Gold Paper Scheme Gold Bars, Gold jewelry and many more. So that
in future people may find it useful

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 CHAPTER 5

CONCLUSIONS

Today's investor has more choices than at any other time in history.
Unfortunately, far too many have learned the hard way that diversifying their
portfolios only with more paper assets provides no security against adverse
financial conditions.

The value of physical gold, on the other hand, is not tied to any government or
corporation and therefore does not bear the risk of devaluation associated with
paper assets. Instead, gold’s value is determined by global supply and demand.

However, global demand is steadily increasing with the emergence of powerful

new economies. And, because of gold’s stabilizing effect, investors are
converting more and more soft assets into gold. Due to recent sharp increases,
gold investment now accounts for over 20% of total demand. When growth in
demand exceeds growth in supply, the actual value of gold increases accordingly.

The problems facing the world today are not going to disappear overnight. In this
uncertain era of globalization and increasing natural calamities it is imperative
that we all be proactive to protect our wealth and secure a future for our families.
For those who have experienced severe losses in their investments it is even more
critical to take action now. It is never too late.

No investment is a sure thing, and no single investment strategy is right for

everyone. However, experts agree it is wise to include gold investments in every
portfolio as a hedge against inflation and declining value in mainstream
investments.

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A general confusion prevails among investors of gold. This may be largely
attributed to modern market characterised by high volatility, rapid ups and
downs and multiple and overlapping avenues of investment in gold thrown open
by financial institutions to allure public. It is difficult, rather, impossible to draw
conclusion

On various investment forms of gold from a small study of this kind. However,
results clearly indicate that among respondents of this study, jewellery continues
to be predominant form of investment in gold.

Though, other forms of investment in gold are making way slowly, for instance:
gold bullion bars, gold coins, and gold certificates. There is also urgent need to
take intelligent measures to assure public of the safety, benefits and reasonable
returns by creating economic comfort zones.

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 CHAPTER 6

BIBLIOGRAPHY

https://economictimes.indiatimes.com/markets/commodities/news/gold-is-third-
most-consistently-bought-investment-globally-wgc/articleshow/72037142.cms

https://onlygold.com/facts-statistics/history-of-gold/

http://www.americaslibrary.gov/jb/reform/jb_reform_fortyniners_2.html

https://bebusinessed.com/history/history-of-investing/

https://isdsnet.com/ijds-v1n1-1.pdf

https://www.researchgate.net/publication/303898266_A_study_on_various_forms
_of_gold_investment

https://www.researchgate.net/publication/336888008_The_usage_of_gold_and_th
e_investment_analysis_based_on_gold_rate_in_India

http://granthaalayah.com/Articles/Vol5Iss11/04_IJRG17_A11_771.pdf

https://core.ac.uk/download/pdf/39671663.pdf

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https://economictimes.indiatimes.com/wealth/invest/different-ways-to-buy-and-
invest-in-gold/articleshow/64568785.cms?from=mdr

file:///C:/Users/Jothi/Downloads/Gold%20as%20an%20Investment%20Option-
2206%20(4).pdf

https://www.researchgate.net/publication/315331415_A_Study_on_Consumer's_
Preference_Towards_Gold_as_an_Investment_With_Reference_to_Coimbatore_
City

https://www.researchgate.net/publication/303898266_A_Study_on_Various_For
ms_of_Gold_Investment

https://www.goodreturns.in/personal-finance/spending/2015/04/5-major-
disadvantages-investing-gold-350964.html

https://www.researchgate.net/publication/304896195_Investor_Perspective_on_F
orms_of_Investment_in_Gold_Some_reflections

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 CHAPTER 7

ANNEXURE

Name –

Age –

a) 25-30years

b) 31-35years

c) 36-40years

d) 41-45years

e) 46years & above

Gender –

a) Male

b) Female

Annual Income –

a) Rs. 2, 00,000 – 3, 00,000

b) Rs. 3, 00,000 – 4, 00,000

c) Rs. 4, 00,000 – 5, 00,000

d) Rs. 5, 00,000 & Above

1) State the % of your savings invested in Gold?

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a) Less than 15%

b) 15% - 20%

c) 30% & above

2) What was the amount you spent on your last Gold Purchase?

a) Below Rs. 10,000

b) Rs. 10,000 & Above

3) For what purpose you buy gold jewellery?

a) As accessory for wearing

b) For gift

c) For Investment

d) Any other reason Specify –

4) Have you made any kind of Investment in Gold?

a) Yes

b) No

5) If answer to the above question is yes, what kind of investment in gold have
you made?

a) Gold certificates

b) Gold accounts

c) Gold stock

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d) Gold mining shares

6) How often you visit a jewelry shop?

a) Weekly

b) Monthly

c) Yearly

d) Occasionally

7) How do you pay their labor charges?

a) In terms of Cash Yes/No

b) In terms of gold Yes/No

c) In any other form specify –

8) When buying a gift for someone, how likely are you to purchase jewelry for
them?

a) Never

b) Very Rarely

c) Sometimes

d) Quite Often

e) Every time

9) Do you import Gold from other countries too?

a) Yes

b) No

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10) How do you buy and shop for Gold?

a) Online

b) Going out Shopping

c) Market

d) Through Social Media

11) What is your main objective for making investment in gold rather than any
other form of investment?

a) It is more secure

b) More value than financial instruments

c) The investment is not affected by market phase

12) Which is the better investment?

a) Gold

b) Silver

13) How much % of your investments deal in gold futures?

a) Less than 25%

b) 25% - 50%

c) 50% - 75%

d) Greater than 75%

14) How much Gold Investment is Risky?

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a) Less than 25%

b) 25% - 50%

c) 50% - 75%

d) Greater than 75%

15) How do you rate the returns in Gold ETFs?

a) Very High

b) High

c) Moderate

d) Low

e) Very low

16) What is your goal with Gold investment?

a) Inflation protection
b) Portfolio diversification
c) Preparing for the worst
d) Other Specify –

100