Today is Akshaya Tritiya, a very popular festival, which Hindus and Jains celebrate each year. Akshaya Tritiya is also considered an auspicious day to buy gold and start a new venture.
Gold in physical form has always been an attractive buy for Indians throughout the year. Gold which is highly liquid can always be sold for cash and traded for goods. Another benefit of buying gold is that the metal can be mortgaged for loans.
Banks and financial institutions provide loan against gold in times of emergency which raises the appeal of metal for buyers. This is a secured loan and interest rate on such loans is less as compared to general loans. Gold serves as hedge against inflation.
Investment in gold also serves as an effective portfolio diversifier as the metal price rises when equity markets are under stress. However, experts suggest one should not allocate more than 10% of his portfolio to investments in yellow metal. Gold prices are likely to rise in the near future as US-China trade tensions are likley to continue for more time.
On Monday, global markets tanked after US President Donald Trump in a tweet said he would raise import taxes on $200 billion in Chinese products to 25% from 10%.
The new warning sent Asian stocks tumbling with Hang Seng sinking 1,125 points or 3.7% to 28,956 level. China's Shanghai Stock exchange fell 6.44% or 198 points to 2,879 level.
The US President's hard line has put those negotiations in jeopardy with multiple reports suggesting that China was considering to cancel high-level trade talks with the US. That could send global markets into a tail spin.
Last week, US officials said there seem to be a fruitful end to the talks by the end of this week but with Trump imposing more tariffs on Chinese goods, the future of global markets looks volatile and bleak. The tariff wars and increasing protectionism may slow down the global growth.
That could lead the prices of gold to rise as investors would look to park their money in safe havens.
How you can invest in gold
You can invest in gold in various forms.
Physical gold: You can buy gold in the form of biscuits, coins or jewellery from jewellery shops.
Gold ETFs: Gold Exchange Traded Funds (ETFs) are investment products that combine the flexibility of stock investment and the simplicity of gold investments. Gold ETFs are passive investment instruments that are based on gold prices and invest in gold bullion.
Sovereign gold bonds: Sovereign gold bonds (SGBs) are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The bond is issued by Reserve Bank on behalf of government of India. The government assures interest of 2.5 percent per annum on the issue price. The interest is paid half-yearly and the last instalment is payable on maturity along with the principal. These bonds have a fixed tenure of 8 years. Also the lock in period for this instrument is five years.