How to Make Money with Gold: A Complete Guide to Investments and Returns

For us Indians, gold is the first thing we purchase when we have some excess funds. This is because gold is considered as a symbol of wealth. Although gold is bought mainly for the purpose of consumption in the form of jewellery, it is an excellent investment alternative as it acts as a perfect hedge against inflation and market volatility. We all know that gold can be purchased physically. But with technological advancements buying gold digitally is also possible. Read to find out the different forms of gold investment and how to save for investing in gold.

Why invest in gold?

Before we get to how to save money for gold, let’s see why you should invest in gold.

Gold is equivalent to money

Our ancestors used gold as a legal tender for a long time. Even after various other forms of currency emerged, gold remained store value for all the countries. Even today, countries keep gold in their reserve as a cover against economic distress and hyperinflation.

Gold can never be zero

Gold has been in existence for over 3,000 years now. However, not once did this metal become zero. Despite facing so many uncertainties and crises, the value of gold always remained above all assets, making it one of the most reliable assets.

It acts as an inflation hedge

When inflation rises, the value of all currencies goes down. However, the value of gold has always gone up. Take, for example, the last decade; the value of gold has quadrupled. This proves that in the long run, the value of gold will always go up and give better returns than a savings instrument and beats inflation.

Liquidity

Gold is the most liquid investment. This is because it is universally accepted by anyone in the world. Be it a jeweller, a pawn shop, or an online dealer, all accept gold and give cash against it. Moreover, it can be carried easily in your pocket. The process of selling gold is also quite easy, and you don’t have to wait for days to get money. Any person buying gold from you will give you cash immediately. This is not the case with any other asset.

Investing in gold doesn’t need specialized skills

Investing in gold is very straightforward. Gold doesn’t require special skills, unlike stocks, mutual funds, and other financial assets. You don’t have to do market research or regularly monitor your investment. You can just buy your gold and store it safely.

Acts a saviour in times of distress

Gold can act as a hedge against market volatility. Moreover, in times of crisis, you can take a loan against your gold or sell it to finance an emergency expense.

Portfolio diversification

Gold is an excellent diversification tool. This is because it has a negative correlation with most asset classes. This means that when the market is in a freefall, gold can protect the value of the portfolio. Hence to reduce the downside risk of your portfolio, you can add gold to it.

Wealth creating asset

In the long-term, gold has given very high returns and hence can be a very good investment. The value of 10 grams of gold in 2000 was Rs 4,400, and today it is Rs 59,890. That’s a 1261% return in 23 years. This means that, on average, the value of gold has increased by 12% every year for the last 23 years.

How to save money for gold?

Saving money for gold is just like saving money for any other goal of yours. All you have to do is set aside some money regularly to buy gold at the end of a certain tenure. But to save, you need to cut down on unnecessary expenses. Only if you spend less will you have enough to save which will help you fulfil all your financial goals. Below are some of the ways you can start saving money.

Save cash at home

The most conventional and popular way of saving money is in cash. You can save it in the rice box as your mother does or keep it in the locker. But make sure it is out of your sight so you won’t spend it unnecessarily.

Save in a bank account

One alternative to saving money in cash is saving at a bank. A savings account is as liquid as cash, and you can withdraw money from it anytime. One bonus of saving money in a bank is that you can earn some interest on the money you save. Moreover, saving money in the bank is much safer than in cash.

Invest in fixed deposit

Fixed deposits (FDs) are among the most popular saving instruments, giving guaranteed returns. Moreover, FDs give higher returns than savings bank accounts. They come in different tenure options ranging from seven days to ten years, so you can choose the one that suits your goal the best. You can choose short-term FDs for short-term goals and long-term FDs for long-term goals. Although you cannot break your FD in between the tenure, you can take a loan against it or opt for premature withdrawal at a penalty.

Save in Jupiter Pots

Saving money in Jupiter Pots is similar to saving money in a piggy bank. But the only difference is that you will save money virtually and not physically. Through Pots, you can save for individual goals and earn exciting interest rates for your investment. This way you are not only saving money, you are earning money from the money you have kept in Pots. You can rename the Pot, set a target amount, and also enable the auto-save option to be consistent. There is no lockin for Pots unless you choose Super Pots. Once you reach the target amount, the Pot will be destroyed, and the money will be transferred into your Jupiter Bank account.

Invest in mutual funds

Mutual funds are a popular investment avenue as they have the potential to give inflation-beating returns. You can invest in mutual funds for your short-term and long-term goals. In case you want to purchase gold in the next one to two years, debt funds, especially ultra-short-term or short-term mutual funds, are the best. However, for long-term goals (more than five years), equity funds are the best. You can start a SIP (systematic investment plan) to ensure consistency in investment.

You can choose any method to save money to buy gold, but only consistency will help you reach your goal. Also, remember to save every bonus or gift money to get to fulfil your goal faster.

How to invest in gold for beginners?

As beginners, you must know the different forms of gold available for investment. The following are the most popular forms of gold.

Buying physical gold

The most popular form of buying gold is in physical form. You can buy physical gold in the form of jewellery from a trusted jewellery shop. Alternatively, you can buy gold coins or bars. In both cases, you need to check the purity and quality of gold.

Gold savings scheme

A gold saving scheme is like a recurring deposit. You can deposit a certain sum every month with a jeweller, and at the end of tenure, you can purchase gold with the total deposit money. However, the jeweller doesn’t pay any interest on the money you deposit. To make up for the interest, the jeweller offers a discount or cash incentive on the last deposit. With gold becoming costlier for the middle class, this scheme can help buy gold by saving regularly.

Digital gold on apps like Jupiter Money

Buying digital gold is easier than buying physical gold. Moreover, there is no hassle of storage, nor do you have to worry about the purity. Apps like Jupiter Money allow you to invest in gold which is 24 Karat at 99.99% purity. You can purchase gold with an amount as low as Rs 100, hence it is very affordable. Every time you purchase gold, it is stored in a vault, so you don’t have to worry about safety. The best part is that you can convert digital gold to physical gold anytime you want.

Sovereign gold bonds

Sovereign gold bonds are government securities issued by the Reserve Bank of India (RBI). They are issued against grams of gold, and the minimum investment is one gram. The maximum investment is the value equivalent to 4 kgs of gold. These bonds pay a fixed interest of 2.5% per annum and have a fixed tenure of eight years. However, premature withdrawal is allowed after the fifth year.

Moreover, you can sell the bonds in the secondary market at the current gold price. If you sell the bonds before maturity, the capital gains are subject to tax as per the current tax rules. However, holding it until maturity means you don’t have to pay any taxes on capital gains. The interest is taxable as per your income tax slab rate.

Gold mutual funds

Gold funds are mutual funds that invest directly or indirectly in gold. They either invest in physical gold, gold-producing companies, or gold mining companies. The primary purpose of these funds is to create wealth by protecting against market volatility. They are highly liquid and can be redeemed anytime. Since they are regulated by SEBI (Securities and Exchange Board of India), they are considered safe. Moreover, you can invest in them through SIP, making an investment in gold easy and affordable.

Gold ETFs

Gold exchange-traded funds (ETFs) are passive mutual funds that track the price of physical gold in the domestic market. They invest in gold bullion but are available to investors in dematerialized format. Since gold ETFs are listed on the stock exchange, they offer dual benefits of the flexibility of stock market investing and the convenience of investing in gold. When you redeem gold ETFs, you do not get physical gold; instead, you will get its cash equivalent. To invest in gold through ETFs, you must have a demat account and should buy the units during market trading hours. Gold ETFs best suit investors who want to benefit from the benefit from the price of gold rather than own physical gold.

Frequently Asked Questions

How can I save money for gold?

Instead of saving for gold and buying all at once, you can put your savings directly into digital gold through Jupiter’s digital gold option. Jupiter’s auto-save facility will help you invest in gold at regular intervals. You can buy gold daily, weekly, monthly, or all at once through a one-time payment. At a minimum investment of just Rs 11 a day, you can start buying digital gold. After buying enough gold, you can convert your digital gold into physical gold.

In case you don’t want to invest in gold this way, you can save money in Jupiter’s Pots and earn interest up to 6.8% per annum and buy gold after you’ve accumulated enough.

Can we earn interest on gold?

Yes, you can earn interest on the gold lying idle in bank lockers through the gold monetization scheme. In this scheme, you can deposit your gold in different schemes (short, medium, and long-term) and earn interest on the value of the gold deposited. Different schemes have different lock-in periods and interest rates, which vary from bank to bank.

Is gold tax-free in India?

No, gold is not tax-free in India. The customs duty on physical gold is 10%, and GST is 3%.

Can we keep gold as a Fixed deposit?

Yes, you can deposit your idle gold in banks as a fixed deposit to earn interest on it.

How much gold can I own?

There is no upper limit to how much gold one can have in the form of gold ornaments and jewellery. However, married women can have a maximum of 500 grams of jewellery without any proof.

How to invest monthly/ daily in gold?

You can invest in gold daily, weekly, and monthly through Jupiter’s digital gold option. Its auto-save facility will allow you to buy a certain value of gold regularly.

Which month is the best for buying gold?

As per historical trends, gold prices cool down from march through August and then again cool off after November. So the best time to buy gold in January, March, April, June and July.

What is the difference between gold and bullion?

Gold is usually referred to its metal form including coins, bars and ingots, whereas bullion encompasses precious metals like gold, silver, palladium and platinum. Bullion is used in trading of precious metals as a commodity rather than considering it like gold in the form of coins, bars, ingots and jewellery.