Invest in Gold and Silver through E-Gold and E-Silver

The traditional, age old ways of buying gold have been ways like gold ornaments from jewellers or coins, bars, biscuits from banks or jewellers. However, since the last few years, new ways of buying gold have emerged. These include buying gold in demat form (electronic), through gold futures, gold ETFs and the latest one is E-Gold. So what is this E-Gold? This article makes an attempt to throw some light on this new product.

What is E-Gold?

The National Spot Exchange Limited (NSEL) has introduced E-series products in commodities. To start with, they have launched E-Gold and E-Silver. Later on, they also plan to cover few other metals and also some agricultural commodities in the same series.  Trading in E-Gold has been on since 17th March 2010. E-Gold units can be bought and sold through the exchange (NSEL) just like shares. Here one unit of e-gold is equal to 1 gram of gold. For long term goals like accumulating gold for children’s marriage, retail investors can buy e-gold in small quantities in their demat account over a period of time. Once their target is achieved, the individual can take physical delivery of gold through the exchange. By buying gold in electronic form (demat), the individual need not worry about the purity of gold, storage costs and the insurance of gold. If the individual has bought e-gold only for investment purpose and does not need to take delivery of physical gold, then he can always sell the e-gold units and encash them. How to invest for Child related Goals

Requirements for E-Gold

To buy E-Gold units, the individual needs to open a demat account (beneficiary account) with one of the impaneled Depository Participants (DP). The list of the impaneled DP’s is given on the NSEL website (or see the list below.) Retail individual can place buy and sell orders for e-gold units with their broker through phone or through the internet (broker’s website). Investing in E-Gold or other metals opens up one more asset class for retail individuals to diversify their investment portfolio. It provides a means to buy, accumulate and sell E-Gold as well as to convert the same into physical gold. To invest in E-Gold you need to have your Demat account at any of these places… India Infoline Ltd, Karvy Stock Broking Limited, Geojit BNP Paribas Financial Services ltd , Anand Rathi shares & stock brokers ltd and many more.

[DDET Click Here to see the Full list of DP’s]
Globe Capital Market Limited
Religare Securities Limited
Goldmine Stocks Pvt. Ltd
M/s. IL & FS Securities Services Limited
Karvy Stock Broking Limited
Monarch Project & Finmarkets Ltd
SMC Global Securities Ltd
SSD Securities Limited
Alankit Assignments Ltd.
Zuari Investments Ltd.
Stock Holding Corporation of India Ltd.
Aditya Birla Money limited / Apollo Sindhoori
India Infoline Ltd.
Master Capital Services Ltd.
LSE Securities Ltd.
Geojit BNP Paribas Financial Services ltd
Farsight Securities ltd
Eureka Stocks & Share Broking Services limited
Microsec Capital ltd
Ashika Stock Broking limited
Anand Rathi shares & stock brokers ltd
IFCI Financial Services limited
These are also known as empanelled DPs
[/DDET]

Delivery Centres

If an individual wants to take physical delivery of his e-gold units then he / she can take it in multiples of 8 grams, 10 grams, 100 grams and 1 kg. To start with the exchange has delivery centres at Ahmedabad, Delhi and Mumbai. In due course of time the exchange plans to open more delivery centres in other cities. India for long has been the largest consumer of gold in the world as Indians love to buy gold. But since last few years because of the steep increase in the price of the yellow metal, it is getting further out of reach of the common man. By introducing the E-Series range of products, NSEL is focusing on the affordability factor by keeping one unit equivalent to 1 gram of gold which makes gold affordable once more, for the masses.

Charges

The Exchange shall levy the turnover charges of Rs. 20 per lakh of turnover to both buyer and seller member on monthly basis. This shall be applicable on all executed transactions. Storage charges shall be levied by the Exchange on monthly basis. Such charges will be computed based on the holding in the respective accounts on the last Saturday of every month. The charges per month per unit of E-GOLD will be 60 paise only. For conversion of e-gold into physical gold as per the current rates, VAT will be 1 % of the value of goods. In case physical delivery takes place in Mumbai, octroi @ 0.1 % of the value of delivery will also be applicable. Interested readers can read in detail in this circular

Conclusion

Though the product serves the purpose of common man of accumulating gold in small-small quantities over a period of time, not many people are aware of this product. To make it a success NSEL will have to create awareness about this product through various investor education channels, so that people realise the benefits of this product. How they go about doing this, remains to be seen.

This is Guest post by Gopal Gidwani , who writes on his blog BachatKhata.com . I have edited it with more information and added the chart .

221 CommentsAdd Comment

  1. Viv

    Hi,

    Firstly, I wanted to invest monthly in Gold and Silver, So just wanted to know is there any ban on buying e-gold & e-silver. Secondly, Looking at the present condition what will be the best way of investment in gold and silver (ETF or Gold Fund).

    Thanks
    Viv

    P.S. -> I have IDBI’s Demat & Trading account.

      • ViV

        Thanks Manish, I have checked with local renowned jewelers but they have maximum tenure of 1 year or 18 months where as i am looking for long term investment in disciplinary manner. So would you please suggest shall I go with ETF’s or Gold Mutual Fund, What is your view of Reliance Gold Mutual Fund.

        Thanks
        ViV

  2. Ritesh Khede

    Hi Manish,

    The information given by you is really helpful. and one can invest in gold via DP.

    1. is this any risk if DP is bankrupt or closed (this will rarely happens but possible)

    2. if I will buy gold in MCX commodity market and rate of gold suddenly fall down and I do not want to book loss and convert that gold into physical format, is this any option to convert that gold?

    Thanks
    Ritesh Khede

  3. Manoj

    Hi Manish and others,
    could someone explain why the price of 1 gm of eGold is higher than the MCX price by around 1000 Rupees. Appreciate if someone can share the details.
    Thanks

  4. b goyal

    Dear Manish

    how will you distinguish between ETF and Egold what are the advantage and dis advantages.
    what do you recommend. I want to put 3-5K every month into this.
    BG

  5. vikram

    What is the comparatively best option Whether it is EFT gold or E-gold. Please advise. Also pls let me know chart of Tax & other charges

  6. Shantanu

    As suggested by most, E-Gold is a better option to buy small quantities of physical gold.But delivery facilities only exit in Delhi, Mumbai, Ahmedabad. No centres for the east,like Kolkata. So not very convenient for the eastern people.
    Also, after physical delivery of (I assume 99.99% purity gold),where to go for making jewellery (22 Carat).Why will a jeweler value the gold.There will be some loss.Please advise.

  7. Vijay Hansora

    Hi Manish,

    This blog is very helpful and i have decided to invest and i have called Religare in Bangalore and one of thier rep will come next week as i am a fresher and new to this i will start with small investment. One doubt i have in this.

    – If i buy small amount of maybe 2 gram gold or such small amount. Then i doubt anyone will be intrested in buying such small amount.
    – If the prices are already high why would someone buy from me ?

    Thanks in advance.

    Regards
    Vijay Hansora

  8. Jitendra

    Hi Manish,

    Today first time in life I went to purchase 1kg silver in PC jewllers and the cost they were quoting was 72,000 = 62,000(latest price) + 10,000(Making charges). Making charges are 10/- Rs per gram. I said “WOW” this is approx 16% extra charges on top of original price.
    Finally I said to sales man “See the charges are unable to DIGEST, let me do some research first”.

    Then I saw your article and this changed my thinking completely. I hope while purchasing E-Silver there would not be any making charges as well as storage charges 😉

    Thanks a lot,
    Jitendra

  9. JGK

    Hi Manish, thanks a lot for the insight. Found useful .

    Any Idea, out of all these listed DPs who holds the majority of NSE accounts? Thought that will help to open an account with them. Or do you recommend any DP / broker (Karvy / IFCI ) for opening the account ? Any one-time, annual, transaction charges involved

    I would choose to open account basis the following factors:
    Best service (offline and online )
    Nominal charges.
    Pls help with comments if any.

  10. L Arora

    If I will take physical delivery of e-Gold in 10 gm coin from NSEL, which purity of gold I will get 995 or 999? and will that be hallmarked or not?

  11. Deepak

    Hello Manish,
    After so much of analysis and discussions with family, we decided to invest in e-gold of NSEL.
    I contacted Aditya birla for the investment in e-gold, as i already had a demat and trading account with them. When i contacted, the representative told me that the account i had is only for equity trading and i have to open another trading account for commodities.

    Is that true?? or is he trying to reach his targets??

    I browsed the website of NSEL http://www.nationalspotexchange.com but i couldn’t found any details of the same.

    Please clarify.

    Regards,
    Deepak Gudla.

    • Yea .. its because the trading account you have deals only with stocks and other things which are listed on NSE/BSE . NSEL is a different exchange for commodities, just open another one .

      Manish

  12. vinoth

    i would like to invest a small amount in silver.. since i am a beginner i do not know which is the best way of investing in silver (ie physical silver or e silver).please explain the advantage and disadvantage on both mode of investment

  13. sarthak hota

    hi manish….. sahara gold mart scheme is offering less value to book more amount of gold(37.5%discount) in a five year investment plan…is there any risk involved in it???

  14. Pawan

    Hi,
    I am planning to purchase gold but I don’t want to hold it physically right at this moment. I have come to know about eGold using which we can buy gold in demat form and later when we wish we can get physical delivery of it. can you please clarify on below points?
    1. How useful or efficient this is?
    2. Can I get physical delivery at any time?
    3. are there any charges incurred in physical delivery?
    4. what is the expense of maintenance?
    5. How safe these are?

    Pawan..

    • Pawan

      1. This is new thing and not many people do this , why dont you buy Gold ETF
      2. Yes, but there will be costs , enquire on their website
      3. Yes
      4. See website
      5. They are safe

  15. Ahmed

    Hi Manish,

    Your original article is dated Sept 2010. Not sure if ICICDirect offered Gold ETF and E-Gold options at that time.

    I currently have a ICICIDirect demat account and there I can see GOLDEX etc which offers investing in GOLD ETF. Is there any option available as of today where I can invest in E-Gold through ICICIDirect ?

    If I opt to invest in GOLDEX Gold ETF, is it possible to take a physical delivery in the form of Gold bars?

    Thanks
    Ahmed

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