Is it better to invest in Gold and Silver?

Red-hot Gold prices – equally blazing Silver

Widespread speculation for further acceleration of this trend in future too.

Then what to do – will it be wise to invest in silver and gold?

Be bullish or bearish or stay neutral – in a fix!

Talk making rounds that gold and silver price may touch double their current prices within the next 2 or 3 years. It is making common man to spend sleepless nights. For people, who wish to buy gold and silver as a hedge against inflation for future needs are in a deep dilemma?  Such people have to think twice and take a sensible decision before they go in for investing in these precious metals. Most important of all is that the present state of economy is to be studied; otherwise no right decision can be taken.

For Indians gold is a symbol for prosperity, purity and social status. It is customary to use silver for making ornamental items and other domestic rarely used items. Actually, in global view, gold is nothing but a trading commodity. It is a safe investment and acts as rescuer in times of severe economic depression and the like. It is a saving tool with the strength to withstand inflation. Silver is a metal used for industrial and other purposes. During the last 5 years, gold has been giving a return of around 25% to the investor. There are a number of reasons, which contribute for the surge in gold and silver prices internationally. Supply and demand as in the case of other commodities are not the actual reasons. Influence of global phases of economic trend, currency, shares, monetary policies of countries, prices of crude oil and many more play a dominant role on the prices of these precious metals.

Can we expect any break?

Price of 10 grams surpassed 28 thousand - rupee mark. Price of a kilo of silver is oscillating around 52 thousand rupees.  In such a situation will it be wise to invest in them? It is a brain-breaking thought. Experience tells us that a number of international events decide the prices of gold and silver. We cannot assertively say as to when their prices still go up. We are in such a harsh situation that we cannot even predict when these violent oscillations would get rectified. Many people prefer these metals to keep their portfolio strong. We can conclude that their prices can go on rocketing so long the international economic instability continues.

Can I invest now?

Gold and silver investments are in the fore-front for the last many days in giving good returns to the investors. People, who invested in them during the year 2010, got an attractive yield of more than 42 per cent. If we analyse the present investment climate, it can be considered as a wise decision if you invest in gold and silver.

Taking decisions according to favourable trends…

Decision for buying or selling gold or silver is to be taken at the appropriate favourable time. Sometimes, even such decisions back - fire.  Therefore, think twice before you take a decision.

Market trends are unpredictable. Don’t invest in them with over-expectations. Always it is better to invest with the needed discipline and with a long term insight.

*Gold and silver can be purchased if there is some stability in the current prices. For investment in gold in a systematic mode, it is better to select ETFs.

* The point to be taken note of is…treat it as a hedge against inflation. It is not wise to invest the entire funds in gold. Ensure that investment in gold does not exceed 15 per cent of the total investible funds. Similarly, invest in silver as a diversified investment. Exception is for gold and silver intended for personal use and for giving as gifts.

Time for selling…

Some people, who purchased them at lower prices, want to make money by selling them now at the present prices. Note this point – presently, they reached the peak of their prices. In such a situation, it is worthwhile to wait and see. Anyway, the moment prices start sliding down, they can be sold.

* To identify what is ‘appropriate time’, observe the trend of exchange value of American Dollar. Gold and silver prices generally move in inverse direction to the dollar. No need to long term investors to make a note of this point.

* Did you purchase gold or silver solely for getting good returns?  If so, you can sell a part of

it now and make some profit. Suppose, you purchased a gram of gold, when its price was Rs.1300, selling it now will not make a difference. But this sale should satisfy the investment purpose that you get something out of it.

* Those, who wish to diversify their investments, can sell a portion of these precious metals

and invest such sale proceeds in some other segments. There will not be any variation in the allotted total value of these investments.

Investment in gold like this…

There are a number of ways to invest in gold.

* Ornaments, Ingots and Coins: In our country gold is mostly used for making ornaments. This is our inherited custom. Persons, viewing it as an investment channel, purchasing coins and ingots, but there will be problem relating to their purity and security.  We have to pay rent if Bank locker is hired or if sold, have to pay tax on the profit. There may be wide variations between the purchase and sale prices.

* Gold Exchange Traded Funds are also called GETFs. They facilitate for allowing investments in them even without purchasing gold. Units will be allotted for the investments. Usually, the price of each unit will be equal to the price of a gram of gold. Transactions in them will be similar to Stock Market Share trading. No problem for transparency and security. They can be sold at any time.

*Gold Mutual Funds:  Funds, which will be invested in gold Mining and Production Company shares, can be purchased.

* In silver: For now, ETFs are not available in silver. Investments can be made in the silver or commodities market or have to buy silver and store it.