Last year more than 20-30 tonnes of gold was sold during Dhanteras.
Even though the pandemic caused a slight slump the tradition of buying gold on this auspicious day lived on. Jewellers saw consumers returning to offline shopping as footfalls increased by 40% when compared to the year-ago period.
But why gold?
Here's the age-old story. There once was a King, called King Hima, who got his son married. Astrologers predicted that the prince would die of a snake bite on the fourth day of his marriage. This information made the bride sad. The bride used an interesting technique when the snake finally arrived. She placed a heap of gold ornaments in front of the snake. The ornaments were so dazzling that the snake could not see anything around it clearly, distracting the snake.
Hence the prominence of gold during Dhanteras.
Significance of Gold during Dhanteras
- Gold ornaments are integral to Indian tradition. It's a symbol of luck, prosperity, abundance and auspiciousness, embodying the Goddess of wealth Lakshmi.
- Indian households take a sentimental interest in buying gold. India has recently overtaken China in becoming the largest importer of gold on the earth.
- Gold sales across the country happened to the tune of almost ₹75,000 crores in 2021.
- Customers are opting for lightweight and trendy gold jewellery and some of the more popular pieces include necklaces, earrings, finger rings, and flexible bracelets
Should you buy physical gold?
Gold is a good hedge against inflation, but there are more reasons why physical gold or even digital gold is not good compared to Gold ETFs. These are the reasons why investing in physical gold is a pain.
- You will have to invest in a secure storage facility.
- You have to interact with a third party to liquidate it, which may incur charges.
Digital gold is not the same as Gold Mutual Funds. For start, digital gold investment is unregularised in India, making it slightly less secure.
Gold ETFs Over Physical or Digital Gold
- While digital gold attracts a one-time levy of 3% GST, gold ETFs only require an annual charge of about 0.5-1%.
- Gold ETFs are influenced by the domestic price of physical gold but are more liquid than physical gold.
- An investor in gold ETFs has the option to invest through systematic investment plans (SIPs) taking the advantage of 'Rupee Cost Averaging'.
Gold ETF Performance
Gold ETFs are bought in units, and 1 unit of ETF is equal to 1 gram of gold. Therefore, these are affordable options for investors. Buying gold jewellery involves paying 20% – 30% of the total value of the gold as making charges. Physical gold’s purity may or may not be 99.5%. Gold ETFs are open-ended exchange-traded funds that invest in traditional gold bullion (gold with 99.5% purity). An investor owns units of an ETF whose value is determined by the market price of physical gold. Over the last 10 years, the Nippon Gold Savings fund gave absolute returns of 37.41%, tracking inflation rates and beating them by a margin too. It's clear from this data that in the long run Gold performs well as a hedge against inflation.
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