Buying Gold This Akshaya Tritiya?

Golden Bangles

Golden Bangles

Akshaya Tritiya is one of the most auspicious days of the year. As per the Hindu calendar, this day which brings luck, joy and happiness in ones life, falls on the third day of the Vaishaka month. Along with Akshaya Tritiya, Dhanteras is also one of the prominent days on which Indians traditionally purchase gold for religious, as well as personal purposes. Well, in all fairness, Indians are really fond of gold and all they wait is for a reason to buy it. Occasions like that of Akshaya Tritiya provide the true moral sanction to expend on gold bricks, coins and jewellery. In the Mahabharata, Lord Sri Krishna handed the ‘Akshaya Patra’ to the Pandavas with a promise that their wealth would never diminish, and that their coffers would forever remain full. It is believed in Indian society that gold bought on this day will surely increase manifold. Gold which has been the traditional symbol of wealth and plentitude since ancient times is a metal, which easily catch our eyes. This year Akshaya Tritiya is predicted to fall on Tuesday, May 7, 2019. However, the sheen seems to have worn off due to high prices of the precious metal. Nevertheless, the usual discounts, offers, and other hoopla are conspicuously on the way to attract consumer interest specifically on this occasion.

Gold Trends

Gold has always been India’s favourite investment option. This explains why India bagged third position in terms of imports till 2017 with the whopping amount of $36.1 billion spent on gold. Whereas, in 2019 demand of gold has been lifted both by the Exchange Traded Funds (ETFs) and central banks. This data is taken in comparison to Q1 2018, when demand of gold dropped to just 984.2 tonnes. Central bank is continuously investing on the global gold reserves which is now seen growing and rising by 145.5 tonnes. In India, gold is not merely an investment option. Gold is bought compulsively for a variety of reasons and not merely for its returns. This means that the spot prices are likely to be higher than future prices and gold buyers often end up paying a premium amount to receive physical delivery of the metal. Though the future movement of prices is not yet clear, who can stop the Indians from buying their favourite metal!!

 What are My Options?

The country’s national obsession is the yellow metal – we buy gold for investment purposes, for social reasons, for ritual purposes, as adornments, gifts, and keepsakes. Gold may now be bought in different forms – as jewelry, coins or bars, as Exchange Traded Funds (ETF) or as gold fund of funds (FoFs). ETFs and FOFs are recent developments in the Indian markets and have clear advantages for the serious investor. The security of the gold is way higher in ETFs and FOFs since physical gold is liable to damage and loss including theft. The purity and quality of gold are not worries that an electronic investor needs to concern himself with but in a country like India where physical buyers tend to believe, rather blindly, the neighborhood jeweler, the guarantee of purity on physical gold is rather low. In case of ETFs and FoFs the investor may recover almost the entire amount at the time of sale but not in the case of physical gold. Also, in some cases physical gold attracts wealth tax but not electronically traded gold. One clear advantage for those buying physical gold is that they will be eligible for a capital gains tax of 10% only if the holding is beyond three years while those holding ETFs for over a year will need to pay the tax on profits made over a year. Now with a plethora of options, let us look at the Akshaya Tritiya forecasts.

 Reign It In

The glint of the much coveted yellow metal seems to have dulled in the past months. The bull cycle that gold saw about 3 years ago now looks like a distant memory. Those who invested in the metal last year on Akshaya Tritiya have seen an appreciation about 12.3% but financial experts are warning against any serious gold purchases as investment in the current market scenario. If you are an individual buying gold coins in small quantities or investing in ETFs or FOFs (also in small quantities) seems to be the best bet.  Predictions are that gold prices are likely to fall further with a strengthening Rupee, once the new government comes to power. Bullion sentiments are weak and are unlikely to show any sharp spurt in the next year or two. It is also quite likely that gold prices may go in for a sharp drop following a bit of a rally due to the Ukraine crisis, experts predict.

This Akshaya Tritiya, instead of investing in gold you may want to donate to bona fide charitable causes – the risks are few and the gains unparalleled.

Related Information: Akshaya Tritiya – The Most Auspicious Day