With Gold prices seeing so much activity, in the recent past, is it a good bet to invest in Gold or Silver this Diwali? Let’s find out more on the Gold Vs Silver battle.
Diwali is the festival of lights and for every one of us, Diwali as well as the days leading to it are auspicious and lot of things are bought or started during this time. Dhanteras is one such day where a lot us buy something as a sign of bringing prosperity throughout the year. So often, people plan their purchases for cars, homes and a lot of major things on this day. One such aspect of Dhanteras is buying Gold. Gold sales go sky high during the festive season. However off late the speculation over Gold prices and the various projections have made people consider Silver as an investment option over gold. So what is it then this Dhanteras; Gold or Silver, What should you buy?
Purpose of Buying:
If you are in a dilemma whether to buy Gold or Silver this Dhanteras, then let me ask you why are you buying it? If you are buying it as a Good Luck Custom that a lot us do, then you can buy anything, because customs and traditions do not require any market updates or prices or any other factor. They are something that is in our tradition and values and if we feel that strongly I guess going for Gold or Silver won’t matter much. However if you are buying for Investment purposes then of course the factors like prices, future projections and all may matter.
Why is there a dilemma?
Off late, Gold has been through a lot of analysis, speculation, RBI curbs on its sale and so on. The prices had touched all time high and have since then corrected. However, there are some projections that still state Gold may reach the 40,000 mark. But let me tell you one thing; please do not base your buying decisions on such projections. I still remember just before Diwali of 2012, there were projections of Gold reaching 30,000 or 32,000 by a lot of ‘experts’, and even local jewellers vouched for it. What happened? It did not reach those levels at that time. It did so a few months back, so if people had purchased Gold on the basis of those projections looking to invest in Gold and selling it off post Diwali at a profit, I am sure a lot of them did not get that opportunity until recently, almost 6-7 months post Diwali. So really there can only be projections, no Guarantees.
Why are people talking about silver?
Talking about Silver, it too has seen a lot of ups and downs, but has always been in the shadow of Gold, in terms of grabbing headlines and getting the hype around it. However, comparatively, in the battle of Gold Vs Silver, Silver has been stable than Gold. Hence a lot of people have started to believe that Silver may be a better bet over Gold. Also globally there is more inclination towards Silver than Gold, because the demand and supply are much more balanced in case of silver, thus pegging silver to outperform Gold, however these are mere projections, and we know what happens with projections these days. Gold is already seeing some curbs on its sales by the RBI because of the large demand and supply void. So on that basis silver may seem a better bet.
The other reasoning or ‘logic’ I came across that people are applying while choosing Silver over Gold, is that silver can be bought in more quantity than gold. For instance 10 gram Gold can be bought for Rs. 30,000 while you can buy around 600 grams of silver at the same price. Their argument is the quantity of silver is more for the same price.
Firstly, the ‘logic’ that you can buy more silver in the same price of 10 gram gold is absurd reasoning. Silver is Silver and its price will grow in accordance with its performance and Gold price will depend on its own performance. So basically, if you spend Rs. 30,000 on 600 grams of silver or 10 grams of Gold and the price rises in both categories, your money will rise accordingly. For instance, if Silver reaches to a level of Rs. 55,000 per kg and Gold reaches Rs. 33,000 per gram, then your 600 grams of silver will fetch you Rs. 33,000 at that point which will be same if you had 10 grams of Gold with you. Basically in investments it’s the monetary appreciation that matters for returns and not Quantity of Stuff purchased.
Secondly, if you want to invest in Gold or Silver this Diwali, then Silver can be opted for over gold, purely because it is much more stable than gold as of now. However, it should be a matter of personal choice as to how you plan to use Gold or Silver from investment point of view. We tend to keep gold for ages and then ultimately it turns in to a Dead Asset (see how). So if your motive of buying Gold or Silver is investment, then be sure of what you plan to do with it. Do not go for jewellery, as it is not investment at all. Instead go for Bars and Coins, which you can either sell out, or get them made in to jewellery in the future without having to pay double making charges, like you would if you buy jewellery.
What matters in case of investment is the manner in which you invest. If you invest keeping in mind speculation and projections; then more often than not you will be disappointed as the markets may not behave in that way, not giving you returns as you expect them to be and you may form your own theory towards investments in such asset class.
Also remember that any form of investment should be given time to grow and show you any returns. Buy Gold or Silver, anything but from an investment point of view stay invested for the long run. Short term speculation and expectations can often cause disappointments as investments do not show significant returns.
Food for Thought:
While Diwali is often a good time for many to buy Gold or Silver, why wait for Diwali every year to invest? If you are starting with your investments, then be systematic about it, if you really want to guard against speculative and volatile markets. The other thing is during occasions where there is bound to be massive demand, like during Diwali, the prices will be higher, so you will be buying at a higher price already and at times, immediately after it prices may correct. If this happens you will have to be patient to see you investments give you positive returns.
If you have to buy gold or silver during Diwali; then invest a smaller portion of your budget and the rest you invest either before or after when the mad rush is over. This way you can balance the customs and traditions with some sound investment step too. Also for Gold investment it is not compulsory for you to purchase physical gold. You can always choose from any one of these Gold Investment options in India to get your Gold investment going.
This Diwali if you have to invest you can opt for Silver if you wish a stable asset class compared to gold. This doesn’t mean that gold can be a bad bet, as Gold and Silver, both have been darlings of a lot of investors over the years. But remember to stay invested for the long run. Don’t expect short term gains. If you have to buy Gold or Silver this Diwali from a tradition point of view, it doesn’t matter much to you as you will buy in any case. But if you are buying Gold or Silver from an investment point of view, you can always buy little during Dhanteras or Diwali and rest of the money you can choose to buy Gold or Silver during the year. This way you are investing systematically throughout the year and the highs and lows of price will average out in the long run.
What do you plan; Gold, Silver, something else or nothing at all? Leave your thoughts in the comments section below.