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10 Terms to know before you start your gold investment journey

Presenting an essential glossary of terms to help new investors navigate the world of Gold-based investments.

February 25, 2022 / 07:46 PM IST

With record inflows last year, gold has emerged as a strategic investment of choice for investors looking to hedge against stock market volatility. Tech-enabled innovations and a variety of gold-based investment options are also making gold a more accessible and hassle-free asset for millennial and young investors. Many are now investing in gold for the first time, and reaping the rewards with more stable returns and added flexibility.

But before one can begin investing gold-based assets, here are 10 important terms one must be aware of.

Bullion

Bullion is the general term denoting gold and silver of at least 99.5% purity, which have been transformed into bars or minted into coins for investment purposes.

Karat

Karat is a measure of the purity of gold, which is defined as the proportion of fine metal per 24 whole parts. Therefore, 24 Karat represents 100% pure gold.

Intrinsic Value

Intrinsic value refers to the true value of metal contained in a physical denomination, like gold coins or bars.

Gold ETFs

Gold ETFs are tradeable units, equal to the price of 1 gram of 24K Gold, which is backed by physical gold holdings. They are traded on an exchange, like stocks of a company.

Digital Gold

Digital Gold is an instrument that allows investors to make incremental investments in gold on online platforms, which is stored in vaults by operators of digital gold platforms.

Strategic Diversification

When investors choose to divide their investment corpus among a variety of asset classes, in order to optimize their exposure to individual asset classes and manage risk, it’s known as strategic diversification.

Inflation

Inflation is a measure of the rise in prices of commodities, which reflects the loss in purchasing power of a currency.

Gold Futures

A Gold future is a contract between a buyer and seller at a price set now, but with a later settlement date.

Allocated Gold

Allocated Gold is the physical gold stored in a vault by an independent provider, which belongs to the owner outright, and is not affected by the vault provider’s financial performance.

World Gold Council

World Gold Council is the apex developmental organization for the Gold Industry. It comprises of the world’s leading gold mining companies.

These 10 key terms will make it easier for young investors to understand the scope and structure of Gold-based investment. They will make it easier to comprehend market trends and lead them to Gold-based investment which fit their purpose.

For more information on Gold-based investments, visit  https://www.moneycontrol.com/msite/mygoldguide

 

Moneycontrol journalists were not involved in the creation of the article
first published: Feb 25, 2022 07:46 pm