Gold has traditionally been one
of the most popular asset classes in India. Many people consider it as secure
and among high growth investments. Typically, Indians used to invest
in gold either in the form of gold jewellery or gold biscuits and coins. Gold might be a glittering temptation for investors but there are some
dangers too associated with buying gold.
Purity It is very difficult for a
common man to gauge the purity of gold unless you are a goldsmith. So, there is
a fair chance of you can be let down a sweet-talking gold showroom salesman.
So, your 24 carat gold may not necessarily be so.
Storage One of the biggest dangers
associated physical gold is its safekeeping and storage. In order to secure
your physical gold from prying and envying eyes of people, you need a bank
locker. This means annual charges of Rs
3,000-6,000 or more.
Liquidity Selling the physical gold, especially
during distress, will not necessarily give you the market price. For instance,
if you buy physical gold from a bank, you cannot sell it back. You will need to
sell it to jewellers. They may not offer you the best price attributing it
deficiency in purity and weight.
Discounted price In India, people have typically
bought gold in the form of jewellery. If you sell jewellery, you typically sell
it discount since you need to give up the making charges component of the price.
This means that you sell jewellery at a discount.
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