GOLD purchase

POSTED BY sonadhi ON April 16, 2013 1:36 pm COMMENTS (26)

Team,

By market conditions for GOLD,I was thinking to buy gold.This caused to think about the GOLD ETF & GOLD FUND.My goal would be to have gold physically available after 15 years for my daughters wedding .What could be the best option.1) To go for GOLD Fund 2) To opt for E-Gold or 3) right now I should wait & buy physically GOLD at lowest price.

Thanks,

Sona.

26 replies on this article “GOLD purchase”

  1. Kumar Ankit says:

    I want to start a Gold SIP.
    which fund should I go
    For?

    Regards
    Ankit

    1. Quantum gold savings.

      Invest in gold only for long term (more than 3 yrs). make sure it is only 10% of total portfolio. Dont look at prices everyday! This sudden fall and may continue.

      See this as a wonderful opportunity to invest in equities

  2. Dear Sonadhi, thanks for the fact that all of us (Dear Pattu, dear Ramesh & me) were of help to you. Please feel free to ask for help & kep visitng forum. it’s for the people like you.

    thanks

    Ashal

  3. sonadhi says:

    My special thanks to PM also who is there to help in a mystic way!

  4. sonadhi says:

    Dear Ramesh,
    I agree for point no.2 &3 & disagree with what you say for point no.1.
    The 15% I have taken as an assumption for better understanding of mine.
    I will not comment on your point no.4.
    Appreciate your concern though I have clearly mentioned my goal in which one should be interested while discussions.
    Dear Ashal,
    So nice of you as you always keep to the point & help a new investor in a
    awe-inspiring way.Well,thanks for that.I understood the message you gave clearly.
    Thanks to everybody for their valuable inputs.
    Sona.

    1. Ramesh says:

      Sorry, Max. possible gold IS not a realistic / practical goal, in my opinion.

      And point 4 was because instead of putting your preference, you had generalized to all Indian Women.

      These points are just to make you think and not to contradict you (I do not get any benefit for that). If it opens your thinking, it will be good for you. <-- completely my opinion. Enjoy. Ramesh

  5. Dear Sonadhi, personally I’m not investing my own money into Gold. I do not believe in it. Whatever gold I hold today is not mine. it belongs to my better half & is in safety of bank locker since our mariage. My wife is also no more interested to purchase gold. So there is a merit what dear Ramesh is telling.

    Now coming back to your own situation, what should I understand – I want to accummulate as much gold as possible to gift to my d’ter. Well how much is too much, only you can answer. Be it 100gm or 500gm or 1Kg.

    What I suggest for you is a gold quantity linked investment. So you set a goal of X quantity for yourself & start purchasing systematically. No emotions are there in this process. At the time of actual need, there is actual gold quantity is there with you in the form of Demat Units which you can use for your consumption as you want to. Regarding making charges, it’s your personal call that how much charges are ok with you.

    Thanks

    Ashal

  6. sonadhi says:

    Dear Ashal,
    My goal is have max.possible Gold in20 years for my daughters marriage.And I am under impression that getting ,lets say 15% over mutual fund may not be sufficient to buy the Gold/Jewellaries if in case Gold Prices reach to the sky as it went straight a way to 33K.So I think SIP in NSEL-Gold may help to accumulate the Gold.However,I agree with PM that the making charges inflation need to be considered(however they may be neglisible as compared to the cost of the Gold).
    Now.I hope that that I have two options-1) To physically buy the Gold in form of jewellaries from Time to Time & keep it in lockers2) To invest in SIP through equities to use the returns to buy the Gold.Appreciate your concern.
    Dear PM,
    Thanks for the link & suggestions.But you know that to have Gold physically is far more better than to have money for Indian womens!

    1. Ramesh says:

      This appears to be a case of ‘boxed thinking’.
      1. Gold for daughter’s marriage. Which is 20 years down the line. Can you even say that your daughter will want to have gold for her marriage. Even today, quite a number of women are opting for non-gold jewellery (eg diamond). 20 years down the line, who knows.
      2. A 15% CAGR in a equity MF may not be sufficient. Really? I mean REALLY. 15% CAGR means doubling every 5 years which means today’s investment at that rate will be 16 Times. Do you think, gold will become 25k * 16 in 20 years’ time? = 4 Lakhs per 10 gram. For a zero-income asset, that would be an amazing price. And I must add this, if it really reaches that level, you will be better off without such a senseless pricey asset.
      3. Please check the way Making Charges are levied. And check with each of your present jewellery. Making charges are levied as a percentage of the Gold price. Eg, if the gold is worth 50k, then all charges (making + jeweller’s profit + ….) will be around 15-20% if you are with a decent jeweller. If you are with a not-so-decent jeweller, that addition will be even more 25-40%, etc. Correct me if I am wrong.
      The saleable value of a Gold jewellery is pathetic (add the condition of Distress Sale, and you are looking at a very bad investment instrument).
      4. The Indian Women you have tried to generalize is a bad, very bad investor. Though, I do not believe in generalizations!

      Learn from history.
      Think and then invest.
      Keep learning.
      And keep things simple.
      Check your premises!

      Ramesh

  7. Dear Sonadhi, why are you interested to receive physical gold? Any specific reason? if your ultimate idea is to purchase jewellery after 15-20 years from here onwards, sell your demay units, get cash & use the same cash to purchase the jewellery of your choice.

    Thanks

    Ashal

  8. Dear Pattu, thanks for the sharing. So we are in the same boat. 🙂

    Thanks

    Ashal

    1. sonadhi says:

      I am referring to the NSEL-Egold Only as it only gives the gold physically at their delivery centers.I believe they have no center in Pune for this.But answer by Pm on getting 22 carat gold at the end is bad,I think.See,my target is to get the GOLD physically at the end by the SIP OPTION as you know that it may not be possible to by the GOLD after 20 years as it may have gone up too buy

      1. Sonadhi,

        Yes I was wrong. E-gold is also 24 carat pure.

        This article maybe of interest to you.

        http://www.moneycontrol.com/news/gold/e-gold-vs-gold-etf-which-one-can-sparkle-your-portfolio_790462.html

        One question: Why opt for physical gold? Are you going to use it as such in the marriage?
        If you are going to use the gold to make jewellery, then making charges will also be subject to inflation.
        Why not just invest in a mutual fund. Assuming a fund returns 10-12% pa this is anyday better than historic gold returns of about 8% pa
        You will have enough money to buy jewels straight away

        Another question is why not buy jewels as and when you can bet now and the marriage?
        Perhaps the designs may go out of fashion I guess!

  9. Dear Pattu, nothing wrong the way you are going to purchase but in your case it’s going to be a one large lump sum outgo, whereas if purchased regularly & systematically, the way I’m offering, we are getting the quantity at an avg. price.

    Thanks

    Ashal

    1. I am also referring to SIP mode only.

  10. Dear Pattu, in case of Gold, no reason to book profit as the goal here is to reach 350gm gold . So whatever the price is at the time of redemption, it does not matter. Also in case of profit booking, there may be a situation that somebody needed gold in 2011, booked profit in 2008 & rest you know, what I mean.

    Thanks

    Ashal

    1. If 350 gm is the target I would buy it as and when it possible and store in a couple of lockers.
      If at the time of redemption the value is not enough to purchase 350 gm I will end up regretting not having gotten out earlier.
      Reg. 2008/2011: indiscipline is the no 1 enemy of the long term investor. If someone is like than then they are better off staying invested!

  11. Biswa Singh says:

    Sorry i wrote Gold Fund as E Gold!!! Its NESEL eGold or eSilver where you can get the physical delivery. Sonadhi, can you please confirm that you are talking about NSEL eGold??

    1. sonadhi says:

      I am referring to the NSEL-Egold Only as it only gives the gold physically at their delivery centers.I believe they have no center in Pune for this.But answer by Pm on getting 22 carat gold at the end is bad,I think.See,my target is to get the GOLD physically at the end by the SIP OPTION as you know that it may not be possible to by the GOLD after 20 years as it may have gone up too buy.

  12. Dear Sonadhi, the gold case is different then Eq. in case of Gold, if price is changing, it’s changing for all gold, be it your investment or the jewellery you intend to purchase from your holdings. So no reason to worry. Redeem your investments just a month or 2 before the actual need & consume.

    Thanks

    Ashal

    1. Ashal,

      Events in the last two days suggest that periodic profit booking and exiting well before goal due is better.

      Sonadhi, I would not not put all my eggs in one basket even it if is golden.

      I don’t invest in any gold but If I am not wrong ETF is better because it deals with 24 carat and physical gold dealt in E-gold is only 22 carat (usually less than!). So when you invest in ETF and redeem you will be able to get more gold!

      .

  13. sonadhi says:

    I will be opting for E-gold as due to facility of conversion into physical gold at the end.Please confirm if my goal is for 20 years,do I really need to take everything back 2~3 years before like equity funds or to opt only at the maturity date of my goal.
    Thanks,
    Sona.

    1. In addition my reply to Ashal below, investing long term in ETF is the most tax efficient.
      E-gold is taxed differently as can be found by simple Google search

  14. Biswa Singh says:

    E-Gold and Gold fund do not do physical delivery of gold. If you are so concerned about physical delivery then prefer NSEL eGold which i think is better than E-Gold and Gold ETF. NSEL eGold reflects the actual market gold price and the transaction cost is less. But yes they charge some amount for the physical delivery after considering the taxation.

  15. sonadhi says:

    Dear Ashal,
    Thanks for the valuable input.I fully agree with you.I am bit confused that one has Physical GOLD & the other has the UNITS/Cash only.But at the end of 15 years,getting cash may result in buying less gold whereas the physical Gold at the end will be benefitial for me.This consufion may be due to my newness to this type of investment.How you differentiate between E-Gold & GOLD FUND as far as the physical delivery of the GOLD.
    Thanks again!,
    Sona.

  16. Dear Sonadhi, there is a good thing & a bad thing in your planning. You want to purchase gold for a particular goal is good thing. Wants to play the waiting game is bad thing. Let me help you. 15Y down the line means you are looking for some 180 months’ time. Now If I assume you ‘ll gift around 350 gm of gold to your d’ter, it means roughly 2 gm gold purchase per month & by the time of actual need, you ‘ll be there with the gold in your hand or in your demat account.

    In my personal view, please start purchasing these 2 units (gm) of gold either in Gold ETF or from E- Gold. If price is changing from say 2600 Rs. to 2550 or 2500 Rs. it does not impact you much as you are purchasing for a long term & systematically. Hope it solves your query.

    To purchase from Gold ETF or E-Gold ‘ll be personal call. But certainly I’m not going to invest in direct physical gold offered by jewellers.

    Thanks

    Ashal

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