Dubai: When stock markets and other assets show constant volatility, where can investors look for safer options? That is anything other than fixed deposits, SIPs, etc. One eternal choice is gold.
With bullion prices showing an upward trend since the start of the year – and continuing on from January 2020 - buying gold remains a sound investment choice. Let’s take some of the reasons to invest in the metal:
Buying physical gold?
Gold prices have shown a tendency to surge in recent years, twice hitting all-time highs twice since July 2020, and benefitting investors. When there is uncertainty, and inflation goes up, gold tends to perform better. With it offering liquidity, gold can be useful when the economy is entering uncertain times.
- When the stocks go down, gold tends to perform better.
- Gold is likely to appreciate during uncertain periods, including recession.
- It can be a simple investment for complex times.
What products to buy?
When you prefer gold as an investment, it is better to go for gold bullion, a form of physical gold. It refers to investment-grade gold, such as bars, ingots, or coins.
Retail gold products are:
- Sovereign mint bullion coins;
- Small bars and rounds ( Small bars range in weight from 1 gram up to 1 kilogram);
- Managed products based on vaulted gold;
- Numismatic coins; and
Gold bar vs jewellery
When you plan to sell, it is easy to sell gold jewellery than bullion. On the other hand, most gold coins are often not sold because the verification process for gold bullion takes a longer time. If your priority is to get money quickly when required, buying gold jewellery can be a good option.
Some tips to follow while buying jewellery as an investment:
- Zero making charges;
- Seasonal buying;
- 24-carat chain bangles;
- Gold made in UAE; and
- Designs without stones
The labor costs are often calculated as a percentage of the prevailing gold price. (Price of gold jewellery = Gold price per gram (24K, 22K or 18K) x weight of gold jewellery x making charges per gram + tax.)
Bangles/chains vs earrings
The making charges for different ornaments can change according to the type of jewellery. Bangles and chains have the least making charges, ranging between 6-14 per cent of the cost of the gold. However, the making charges of earrings and necklaces can be higher when compared with bangles and chains.
The main reason for the price increase is that most bangle and chain designs are machine-made, and the labour cost would be less than those involving manual labour. However, the making charges are not the same for all jewellers, and customers can bargain with the jeweller to reduce the making charges. Some jewelers would reduce making costs by 5-10 percent.
However, it has to be noted that when you sell 22K jewellery, you are likely to get a lower amount because jewelers won’t take into account the making charges or wastages.
If you plan to buy gold as a long-term investment, the best choice is 24-karat because it is purest form of the yellow metal. According to experts, the resale value of 24-karat gold is the best compared to 22K or 18K options.
- Quality: It is 99.9 percent pure and is the highest in standard and quality.
- Appearance: 24-karat gold won’t be as durable as 22-karat gold but the colour of the former is the best.
- Resale value: When you sell 24-karat gold, you will get good resale value.
Attraction of UAE gold
It is also important for a customer to know where to buy the best gold. When you buy gold from UAE, it is beneficial in many ways. The price is comparatively cheaper because of the zero-tax regime on gold bar imports. In the case of gold jewellery, a flat rate 5 per cent is applicable, while other countries charge a higher import tax. Tourists will also get a VAT refund.
The UAE is also renowned for the purity of its gold. There would be frequent gold inspections at the sites of retailers and wholesalers in Dubai, and there are ultra-modern lab equipment and trained technicians to check the quality of gold.
The making charge in UAE is lower than other countries because it is fixed per gram by the retailer. The suggested retail gold rates are updated three times a day. (You can also bargain while buying the yellow metal from gold souks.)
Jewellery without stones
People also prefer to add gemstones along with their jewellery. When you sell them, you are unlikely to get more than 85 per cent of the stone’s value. In the case of pearls, they often don’t have much resale value unless they are unique and natural ones.
The same is the case of the diamond as it also has a low resale value. The resale value of diamond jewellery is around 25-50 percent of the original purchase price. So, if you prefer a good resale value for jewellery, it is bet to avoid buying jewellery with stones.
Major jewellery stores come with festive offers and discounts, especially during the holiday season. When you get good offers, including cashback, protection assurance, etc., it can be an additional advantage for your investment.
Understand the store’s buyback policy. Some dealers prefer to buyback only their own gold. It is also helpful to compare prices of different retailers. Understand the costs, fees and buyback policies of various dealers.
With inputs from Agencies