Make your portfolio shine with gold

It is evident that gold is an asset class that you can rarely go wrong with.

Exposing your portfolio to gold is a good investment move. While equity, debt and real estate may form the core of your portfolio, investing in yellow metal has always been an ideal money move, claim experts.

Being a ‘defensive’ investment of your portfolio, every penny you put into it is well worth the gold’s weight.

Gold prices have been volatile, but well within ranges and though the metal has had a strong run in 2006, analysts predict there will be a further appreciation in its prices.

Gold prices are linked to the strength of the dollar. With the dollar weakening and expected to continue doing so, demand and prices of gold are sure to rise.

The price of gold is also expected to rise because of the rising cost of production. Activities in many African mines have reduced due to strife, adding to low supply situation.

What kind of gold should you buy?

Gold can be bought in various forms and the decision should be based on the reason one buys gold. If you see it only as an investment, you can either buy it in the form of physical gold – bars, biscuits or coins or even in a dematerialized form.

For most Indians, gold purchases usually means buying jewelery.
However, the disadvantage of buying gold in the form of jewelery is that its resale is not always a profitable proposition.

Firstly, jewellers discount what you paid as ‘making charges’ from the value of your jewelery, and secondly, most jewelers do not give cash in lieu of the gold.

Therefore, gold bars and biscuits are ideal ways of investing in physical gold. They are priced at the market value and can easily be exchanged for cash.

Where should you buy it from?

As banks have now started retailing gold bars and coins to customers, there has been a serious debate about the place to buy gold from.

Bullion experts recommend that it is best to buy gold from a reputed jeweler. Banks that sell gold bars charge a premium as high as 15 percent for providing you with a certificate of purity, but you are assured that the gold is pure.

Leading jewellers in all cities also sell pure gold bars but most of them do not provide a certificate with it.

However, in dematerialized form, gold can only be bought in the commodity exchanges.

But remember sale of jewelery or bullion is taxable. The short term (less than three years) rate is your marginal income tax and long term (over three years) is 20 percent with indexation.