There is something about the shiny yellow metal that makes everyone weak in their knees. No matter whether it is the seasoned investor or your wife who has a thing for everything that is made from gold, this happens to be one of truest statements. Well, no one is denying the obvious beauty and glamour quotient that is involved with this metal. But does it mean that it is the best investment tool available?
Most people are of the opinion, owing to the steady upward trend of gold prices in recent years as well as historically, that it is the safest and best investment tool. But the reality is far from this claim. Gold is an amazing investment option, but it is not the best one. Here are 2 reasons that justify this reasoning:
1. Gold is a Personal Asset
One of the biggest problems is the fact that most households run like mad at the prospect of buying a gold jewelry. They believe that it is not only a matter of ornamentation but also an amazing investment tool. What you forget is the fact that gold, say for example an American eagle gold coin, is an investment tool. Gold jewelry is nothing but a personal asset.
A gold jewelry comes with its own fair share of extensive and intricate designs, which involve hefty making charges for the toils of the designer in question. This cost is not taken into account when you are ‘investing’ in gold or when you are trying to resell it. This hefty cost is often written off as expenses that can’t be recovered in the investment terminology.
2. Gold In The Form Of Coins And Bars
Well, many so-called smart investors prefer investing in physical gold rather than buying gold jewelry for themselves. While there is no doubt in the fact that this is a better form of investment than gold jewelry, owing to the absence of making charges, there are a number of drawbacks along with it.
a. Storage Cost
When you have bought physical gold, you just can’t leave it lying around your home or keep it in the ‘safe’ locker in your almirah as it is unsafe. This is why you will need to store it with banks and other locker service providers. They will charge a premium for the high value of the gold bars and coins and the security for the same that they will need to provide.
b. Capital Gain Taxes
Capital gain taxes are imposed on all the profits that you make out of selling the physical gold at a higher rate. While long-term capital gain tax (which is imposed after a period of 3 years of storage) is lower than the short term capital gains tax, the fact that you will need to pay a significant amount of your profit as taxes is a dampener.
Yes, gold as an investment tool and commodity has seen a lot of appreciation in the recent times, but that surely doesn’t make it the best investment option for you.
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