Tag: Gold

Sovereign Gold Bonds – 9 things you should know

Posted on by Team Jagoinvestor

Most of the investors feel that gold is a good option to invest. One, because it gives quite reasonable returns and second but most important, we have an attachment with gold as per our traditions.

However, if you want to buy gold physically, you need to bear storage cost i.e. locker rents and along with this, it is not easy to buy and sell physical gold. And hence, Gold ETFs came into existence, which enables investors to trade gold on stock exchange and earn returns like they would be doing in case of physical gold.

But, now there is another option which is just like you are investing in physical gold available in Demat form, which can be traded on stock exchange, and also get a small amount of interest on the investment.

We are talking about Sovereign Gold Bonds. These bonds are issued by RBI in consultation with Govt. of India.

What is Sovereign Gold Bond?

Sovereign gold bonds were introduced by the Government of India in 2015 under the Gold Monetization Scheme, to enable investors to invest in an asset class which is a substitute for physical gold.

RBI announces public issues under these schemes in tranches i.e. specifying series along with dates of subscription of series of bonds and date of allocation.

You can refer below table for the SGB scheme 2019-2020 issue –

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S. no. Tranches Date of subscription Date of Issuance
1 2019-20 Series V October 07-11, 2019 October 15, 2019
2 2019-20 Series VI October 21-25, 2019 October 30, 2019
3 2019-20 Series VII December 02-06, 2019 December 10, 2019
4 2019-20 Series VIII January 13-17, 2020 January 21, 2020
5 2019-20 Series IX February 03-07, 2020 February 11, 2020
6 2019-20 Series X March 02-06, 2020 March 11, 2020

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As these bonds are issued by the Reserve Bank of India on behalf of the Government of India, they carry sovereign guarantee. These bonds are issued at the discretion of government from time to time with a specified close date, and they are open for the public to subscribe.

The bonds are denominated in units of one gram of gold or multiples thereof. Minimum investment in these bonds is one gram.

9 features of Sovereign Gold Bond?

Let us understand the Sovereign gold bond in detail by referring to all its features.

1. Who are eligible to buy sovereign gold bonds?

Any resident individual including HUFs, trusts, universities and charitable trusts can buy sovereign gold bonds. This bond can also be purchased by a guardian or parent on behalf of a minor. But, a non-resident or ordinarily non-resident of India cannot buy a sovereign gold bond.

However, if a resident individual who bought SGBs, who has now become NRI can hold them till the maturity of the bond but cannot repatriate the maturity amount. He/she cannot even trade SGB’s on stock exchange.

2. Denomination of gold bond

Each investment will be denominated in multiples of gram or grams with a basic unit of 1 gram at least to be purchased in a single purchase i.e. minimum investment. It means if you want to invest Rs. 10,000 and the rate of gold on purchase date is Rs. 4000 per gram. So your investment will be denominated in 2.5 grams.

3. Maximum Amount

There is a limitation on the amount of gold that you can be held in sovereign bond. How much gold one can have in a financial year i.e. April to March (whatever can be the price of gold) is given for each category of eligible investors –

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Category Maximum Subscription
Individuals 4 kg
HUFs 4 kg
Trusts and similar entities 20 kg

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This ceiling will include bonds purchased under different tranches during initial issuance by government i.e. subscribed in the primary market as well as via the secondary market.

4.Issue Price

The price of the bond will be fixed in Indian rupees on the basis of the average closing rate of the last 3 working days of the week preceding the subscription period of gold having 999 purity (24 caret) published by India Bullion and Jewelers Association.

The issue price of the gold bonds will be less by Rs. 50 per gram for those who subscribe for it online and pay through digital mode.

5. Interest rate

The investors will be paid Interest on the amount of initial investment at the rate notified by RBI for a particular tranche at the time of its launch and is payable semi-annually. Till date interest is near to 2.5% p.a.

6. Redemption

Redemption price shall be fixed in Indian Rupees and the redemption price shall be based on a simple average of the closing price of gold of 999 purity of the previous 3 business days from the date of repayment, published by the India Bullion and Jewelers Association Limited.

7. Listed on the stock exchange

These bonds can be held in Demat form and the government has enabled trading of gold bonds on the stock exchanges i.e. NSE and BSE. This feature is given to enable easy trading of bonds and one can buy bonds even after the subscription period is closed.

8. Maturity

The tenure of the bond will be for a period of 8 years with exit option in 5th, 6th and 7th year, to be exercised on interest payment dates. It means one cannot redeem bonds before the end of 5th year. However, if one wants, he can transfer bonds via the stock exchange platform. So, we can say that there is no lock-in for SGBs.

9. SGBs can be used as collateral

Bonds can be used as collateral for loans. The loan-to-value ratio (LTV) is to be set equal to ordinary gold loan mandated by RBI. Therefore, it is a very good option that you can use gold bonds as security against loans like stocks.

9. Payment Options

The payment of SGBs can be made in cash (up to Rs. 20,000) or Demand Draft or Cheque or electronic mode. It’s good that you have an option to use cash for it. However, on redemption or transfer, the amount will be credited to your bank account.

How to buy Sovereign Gold Bonds?

Whenever the government of India announces a series of bonds, they specify the dates of subscription, date of issuance of bonds and the amount of purchase per gram. A subscriber can go via physical mode or online mode for subscription of SGBs.

1. Physical Mode – To invest in gold bonds, you can fill in the application form which is provided by issuing banks or from designated post offices. You can also download the application form from the website of the Reserve Bank of India.

Scheduled Commercial Banks (excluding RRBs, Small Finance Banks and Payment Banks), designated Post Offices (as may be notified), Stock Holding Corporation of India Ltd (SHCIL) and recognized stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange Ltd. are authorized to receive applications for the Bonds either directly or through agents.

2. Online Mode – To invest in bonds using online mode, one can use their intermediaries/broker’s platform or bank platform. There will be a discount of Rs. 50 per gram if you purchase via online mode and paying through digital mode.

Every applicant must provide their PAN number issued by the Income Tax Department. Without a PAN, one cannot apply for investing in gold bonds.

Tax treatment of Sovereign gold bonds

The capital gains tax arising on redemption of SGB to an individual has been exempted. This is an exclusive income tax benefit offered on gold bonds to encourage investors to shift to non-physical gold.

However, the transfer of gold bonds before maturity will attract Capital gain tax. The indexation benefits will be provided to long term capital gains arising to any person on transfer of bond using secondary market after 3 years from the date of purchase.

The interest received on SGB per financial year is taxable as per the slab rate of subscriber.

Comparison of Physical gold, Gold ETF and Sovereign Gold Bond

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Points Physical Gold Gold ETF Sovereign Gold Bond
Returns Lower than actual return on gold (due to making charges) Lower than actual return on gold (due to brokerage) Higher than actual return on gold (due to interest payments)
Safety Risk of handling physical gold High High
Purity of Gold Purity of gold always remains a question High as it is in electronic form High as it is in electronic form
Capital Gain LTCG applicable after 3 years LTCG applicable after 3 years LTCG applicable after 3 years (No capital gain tax if held till maturity)
Loan collateral Yes No Yes
Tradability Conditional – depending upon availability of buyer Tradable on exchange Tradable on exchange and redeemable 5th year onwards
Storage cost High No No

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Are sovereign gold bonds safe?

As we already mentioned, these bonds are issued by RBI in consultation with GOI, it ensures that there will not be any question about default risk i.e. no risk of repayment. However, the price or the redemption value of the bond will depend upon actual market price, so a drop in the market price of gold can put the capital at risk, which is a fact in case of holding physical gold or gold ETFs as well.

Why should you invest in Sovereign gold bonds?

See, buying SGB’s are suggested just as a substitute for buying physical gold. The flaws of buying physical gold are many like, they are not easily tradable and involve heavy storage cost, you don’t earn any interest on holding physical gold, you bear making charges and if you earn any gain on sale of gold you have to pay capital gain tax.

In SGBs you need not to face all these flaws instead they are very safe in terms of default risk, We cannot say that there is no risk, considering capital loss risk that may happen due to market price change.

Conclusion
If you are looking for long term investment in gold then instead of physical gold, SGBs are suggested. You don’t need to pay any tax i.e. capital gain tax on redemption of SGB on maturity or after 5th year. But, keep it in mind that there is STCG tax or LTCG tax on the transfer of SGBs on stock exchange before maturity and there is a limit on the quantity of gold that one can hold per financial year in the form of bond.

Sovereign Gold Bond Scheme Launched – Here are 6 important Facts

Posted on by Jagoinvestor

Today I want to share some quick facts regarding Sovereign Gold Bonds which was announced in budget session and recently mentioned by our Prime minister.

RBI is going to issue something called Sovereign Gold Bonds for investors who want to benefit from the movement from Gold prices. It’s an alternative way to invest in gold apart from buying physical gold or through gold ETF or gold Mutual fund.

These bonds issue is part of the market borrowing program of govt of India, where it tries to borrow money from the public for the long term. So to understand it in brief, govt wants to borrow money from those who want to invest in gold and they would return back the money after X number of years which will be linked to the price of gold apart from a small interest.

Sovereign Gold Bond Scheme 2015

10 FACTS about Sovereign Gold Bond Scheme you should know

Now let’s understand quickly what Sovereign Gold Bond Scheme is all about and some high-level important points every investor would want to know.

1. Issued by RBI and hence it’s safe and secure

These bonds are issued by Reserve bank of India and hence it carries a sovereign guarantee by Govt of India.

So in a way its 100% safe and secure and there are no chances of fraud or any issues happening in the future.

However, you need to know that the bond value is linked with the gold prices and hence the value of the bond can increase and decrease in the future depending on the gold price movement.

However, whatever is the maturity value will be paid to you and the guarantee is only for that. There is no assurity for any minimum value payment or any promise of return. One can hold the bonds in a single name or joint name as per preference.

2. First Batch of bonds available from Nov 5-20

As per a report, out of Rs 15,000 crore of bonds, the first batch of Rs 1,000 crore bonds are available from Nov 5 and the last date for application is Nov 20. The bonds are available for only residents Indian and NRI’s cant buys it. The bonds will be available at selected banks and post offices designated under the scheme.

I was not able to find exact locations, but I think all the major PSU banks in every city and some big post offices will be the contact point if one wants to purchase these bonds.

Below you can see a sample form and how it has to be filled. You can also download the form from his link

Sovereign Gold Bond Scheme form sample

3. Amount of investment and Tenure

The minimum one has to buy 2 gms worth of gold bonds and the maximum can be 500 gms. So every normal middle-class person who wants some exposure in gold can buy it. The initial issue price is fixed at Rs 2,684 per gram. Which means a minimum initial investment would be Rs 5,400-5,500 at least.

Note that price fixed is a simple average of the closing price of the 999 purity gold, published by India Bullion and Jewellers Association Ltd (IBJA).

The bonds will be issued with an 8 yr tenure, however, an exit option will be available after 5th year onwards. The bonds can also be traded on stock exchanges if you have it in Demat form. However, I think it’s not going to work for most of the investors because that will get too complicated.

Also, you will be able to trade the bonds on markets only if the volumes are very good, otherwise it will be locked away and you will be able to get back the money only after the 5/8 yrs of time. You can read detailed FAQ’s on this scheme here

Also note that these bonds can be provided as collateral incase, you need any loans.

4. You will get interest of 2.75%

You will get interest of 2.75% interest on the initial value of investment (not the market price) every 6 months. I have not gone in details, but I think the way it will work is that if you invest Rs 1,00,000 in these bonds, then every 6 months you will get 50% of 2.75% of Rs 1 lac as interest, which would be Rs 1,375

5. Taxation on returns and maturity

Note that the interest you earn every 6 months will be taxable in your hands. Also at the time of maturity, the long-term capital gains will be applicable, which means that after applying indexation, you will have to pay 20% tax on the returns. Note that because KYC is done properly, you cant escape this.

6. KYC requirement

You will be able to buy these gold bonds only after the KYC is done for you. In simple terms, at the time of application, you will have to provide your identity and provide your PAN or Aadhar card etc and the payment can be done electronically, with cheque/DD or even CASH.

However, you will not be able to hide your identity. This will surely discourage those investors who want to convert their unaccounted money (CASH) into white money.

7. Investment in Paper or Demat Form

You can purchase the bonds in paper format or Demat holding as per your preference. Means if you want the bond in paper format, you will get a receipt and a bond that you can keep in your locker or at home and at the time of maturity you can give it back. Or you can hold it in Demat form and not worry about keeping the bond safely.

Who should not invest in these gold bonds?

I think that 5-8 yrs tenure is a long tenure and you can earn much better returns in this long term. Equity mutual funds would deliver better returns compared to this scheme. Hence if you are a young person below age 40, and are looking at wealth creation as your main goal, then you can give a miss to this scheme.

The return on the scheme (2.75%) is not to be considered and the gold returns historically have been around inflation only.

If you look at the below chart, you can see 5 yrs CAGR return of the gold investment. Note that for the tenure of 2000-2010 the returns have been very very good, but then if you look at someone who invested in the year 2010, they have just got a 7% CAGR return, which is very much in tune with long term gold returns.

gold 5 yr cagr return

So if we look at the optimal use of your investment to generate a decent return, I personally dont consider this as a great investment product. You can skip this.

Who can think of buying these bonds?

Now if we look at the other side, There are many investors who are very attached to gold and really want to invest in that. No logic will move them and no conversation of CAGR will make sense to them. So for those investors who were anyways going to buy physical gold or Gold ETF, can look at this scheme as a good alternative.

Anyways your investment value will move as per gold prices and on top of it, you will get 2.75% interest which you do not get in case of physical gold or gold ETF/funds. The best part of this scheme is that you don’t have to worry about the quality of the gold or where to store it as its all in paper format and no one is going to steal it from you.

The money will only come back to your bank account only which you have provided at the time of investment.

However, note that the investment in these bonds is going to be mainly illiquid in the very short term. If you buy physical gold, you get that liquidity in your hand and if you need money urgently you can sell off the gold. You will not get it here.

So overall, you are the right person to pick if this scheme is for you or not.

Please share what are your views on this scheme. Do you think it’s going to be a hit among investors?

Are Gold Saving Schemes from jewelers really worth investing ?

Posted on by Jagoinvestor

Are gold saving schemes by jewellers really a great investment option? There are huge number of people who become part of gold saving schemes offered by jewellers, assuming that they are amazing deals which they should not miss! There are few advantages and disadvantages about these gold saving schemes. It’s important to understand them before you invest in those.

Ankur asked this simple question on our jagoinvestor forum which triggered this article

Lately there are ads coming on TV abt this Golden harvest scheme (GHS) from Tanishq, where you pay for 11 months and the company will bear the installment for 12 month to buy Gold. Any reviews abt the scheme?

Gold Saving Schemes

1. Most of the schemes are plain money saving schemes

The way a lot of gold saving schemes project their plan is as if you are buying real gold each month, but majority of them are just plain money saving scheme where you deposit a fixed amount each month for X months and in the last month the jeweler deposits the “bonus” installment and then finally you use the money to buy the gold jewelery at the price prevailing at that time! Not at the gold price the time of joining the scheme! So in practice the whole scheme becomes like a recurring deposit where you deposit some money each month. The bonus installment deposited by jeweler makes sure you get a return around 8-10% on the overall installment.

2. You cant redeem Money

Unlike recurring deposits, you can’t use the money accumulated in gold saving schemes for any purpose. The gold saving schemes make it mandatory that you have to buy gold jewellery and only gold jewellery, not even gold bars or coins. So in case you need money for some other purpose, you can’t use it. But you will say that it’s fine, because at times you also are offered “Zero Making Charges” under these schemes, but you miss reading the terms and conditions which says that it’s only on selected designs and models. What if you do not want to buy those designs? In that case you have to pay the making charges which are applicable and what happens if the design and model which you like have much higher price than you have accumulated? In that case you have to shell out more money. The making charges which you will pay will cancel out the 8-10% returns which you make on the whole scheme.

3. Not as safe as Recurring Deposit

Now as you have understood that gold saving schemes deep down are just like a recurring deposit. However they are not as safe as a banks recurring deposit, for the simple reason that jewelers are not as strong financially as banks and some jewelers actually deposit the money they get in schemes in banks as fixed deposits only. Some jewelers might even be using the money for their operating expenses also.

4. Gold saving schemes are designed to guarantee future sales

If you look into the design of gold saving schemes, it’s clear that it’s a way to assure future sales. People join these schemes, start saving money with jewelers and after 1-2 yrs, they will buy some thing from them. So if X people join the program, all X people will buy something at the end.

R.K. Sharma, executive director from PC Jeweller confirms this – “This scheme is a business building programme. By getting customers involved in this scheme, we ensure future sales. A majority of the times, people purchase a jewellery for a higher price than the amount invested. It is a sure shot business opportunity through which we seal our future sales.” – source

Some of the gold schemes in market

  • Gold Harvest from Tanishq
  • Jewels for Less from PC Jewelers
  • Shagun from Gitanjali
  • Kalpvruksha from Tribhuvandas Bhimji Zaveri
  • Gold Tree from GRT Jewelers
  • Jos Alukkas Gold Saving Scheme
  • Kothari gold deposit scheme
  • Gold Schemes – Bhima Gold

When you should join these Gold Saving Schemes ?

So given these fine points, there are few advantages to these gold investing schemes and there are conditions when you might want to invest in those.  The first thing is that, a lot of investors who do not understand what are other kind of options for investment in gold like Gold ETF, e-Gold etc which are popular ways to buy gold online these days. Because of not having full information, investors get inclined to these schemes and invest on the name of “Gold”.  However good part of these schemes is that, because of these gold schemes, they atleast develop the habit of regularly investing some money, which they would not have done otherwise. So these schemes can be your monthly gold investing plan in a way.  These investors will not invest in gold ETF and simple recurring deposits anyways, so its better that they atleast invest in these gold investments schemes by jewelers atleast. So these schemes are good from that point of view.

Another reason when you can look at these schemes is when you have a marriage or function due in next 1-2 yrs and you might want to systematically invest some fixed money for the purpose of buying gold jewellery. Even in that case it makes sense to get into these schemes.

Have you invested in these kind of gold saving schemes online without understanding how it works? What are your comments on these kind of schemes?

6 Best ways of gold investment in 2018

Posted on by Jagoinvestor

Gold recently crossed its Rs.31,000 per 10 gm mark. This is a historic moment and I am sure a lot of people want to get into gold investment for their own set of reasons. But how to invest in gold?

There are so many ways of gold investment these days; most of the people are stuck with so many choices. More than the price, the bigger deterrent the confusion of “best option of gold investment”.

In this article, we will see how to invest in gold in different ways and what are the pros and cons of all the options. The main focus of this article is to make the options more clear to you and help you make decisions.

How to invest in gold

6 ways to invest in gold

Earlier investing in gold was related to buying ornament, but now, the advanced technologies and developments in the field of finance and investment have extended these limits, because of which we have a lot of options for gold investment.

Let’s see some of the ways of gold investment.

1. Physical gold

The oldest and most widely used way of gold investment is in the form of physical gold. I would say this is a form with which most the people are comfortable with. For centuries, physical gold is the only way of gold investment.

Now coming to the point, there are two ways to invest in physical gold.

a) Jewelry –

This is the most famous way of investing in physical gold. This is mostly done for consumption rather than “investment”. Obviously jewelry is also an investment product in itself, but most people buy it for consumption purposes.

The best part of Jewelry is that it’s very easy to invest in it, all you need to do is cash or cheque and that’s all, you can buy it. Also, the whole family is more comfortable with this option. However, the sad part is that you do not just pay the market price of gold, but also making charges for jewelry.

As it’s in physical form, there are chances of theft also. One more problem with jewelry is that there are chances of fraud at times; you can be sold an inferior quality of gold in the name of “high quality” gold. So it’s very important from where you buy it.

When should you buy it?

It’s advisable that if there is some marriage going to be there in your house in the near future, you can invest in physical gold. Also, note that you are very clear that it will not be required for an emergency in the short term.

It might also be a possibility that you are more attached to physical things and do not believe in online options, that’s another reason you can go for it.

b) Gold Bar/Coin

The Gold Bar and Coins are another good way to invest in the physical form of gold. Gold bar/coins are sold by all the banks and jewelers. It’s a good way to invest in gold if you want to do it for pure investment purpose or for some distant future marriage like your sister or daughter marriage.

The good point about bars/coins is that depending on the requirement you can either buy more (bars) or less (coins) and easily available at Banks and jewelry shops, but banks only sell it, do not buy it back. Also generally there is no consumption done on a regular basis so a person can keep it in a locker or some safe place for a long time.

The bad part of gold bar/coins is that it’s always available at a premium price of 5-10% and at the time of selling them, you again will get a discounted price of 5-10 %, so overall your returns will go down.

When should you buy it?

You can buy a gold bar/coin if you are too attached to physical gold and cannot go for an online option. You can buy it for investment purposes also, but note that returns would be compromised because of the discounted price you get at the time of selling and at the time of buying.

In case you have some marriage at home in the coming future (not very near), then also you can buy it.

2. Gold ETF

Gold ETF’s are just like stocks; you can invest in these if you have a Demat account. An ETF an online version of physical gold. The best of gold ETF is that it’s convenient to invest in Gold ETF if you already have a Demat account and can start with a small amount (1 gm value) and as and when you want you can invest from time to time.

However, the sad part is that you have to pay the brokerage and you do not get a feel of gold in your hands which you get with physical gold. The gold ETF can also be illiquid at times if you have not chosen the right one.

Also, there are high chances that you will sell your gold ETF in the time of small emergencies which you will not do with physical gold. Gold Bees from Benchmark and Kotak Gold ETF are one of the biggest gold ETFs in India right now and they are highly liquid.

We recommend Gold ETF’s to our Financial Planning clients as their expectation is liquidity + some exposure to gold for investment point.

When should you buy it?

You should buy gold ETF if you already have a Demat account and would like to invest from a pure investment perspective, you can consider them as liquid as you can sell them on any day in the stock market.

Click here to read the difference between the gold ETF and gold savings fund.

3. Gold Fund of Funds

Gold Mutual funds are those mutual funds that invest in another parent mutual fund which finally invests in stocks of gold mining companies and companies which are related to gold-related activities. They also buy physical gold, but in very small quantities.

This is not a suitable investment for those who want to track gold prices, because these funds do not invest most of their money in gold, but gold-related companies. So it’s mainly an equity fund which invests in companies.

For example AIG World Gold Fund, which does nothing but invests in its parent mutual fund AIG PB Equity Fund Gold, which finally invests in different companies.

The good part of these funds is that if you are optimistic about the future of those companies involved in gold, these are good funds, but the sad part is that you will pay expense ratio two times because it is a fund of funds. A lot of people invest in these funds by mistake thinking that they invest in real gold.

When should you buy it?

By now you will be very clear that these are actually like a sectoral fund that invests in only those companies which have their work in gold-related things like mining gold etc. So it’s extremely risky or rewarding.

So if your criteria are to invest in gold companies and not gold, these are the funds to invest in

4. Gold Saving Funds

These are the mutual funds that invest in real gold. They take in money from people and buy gold and you can buy the units of these mutual funds. The best part of these funds is that you can systematically invest in gold per month through the SIP route.

The best part of this is that you don’t need to have a Demat account to invest in gold saving funds. You also can invest regularly in gold through SIP through these funds. But the sad part is that you pay administrative charges and expense ratio just like any other mutual funds.

When should you buy it?

This is really a great way to invest in Gold if you do not have a Demat account and would like to regularly invest on a monthly basis. This is a highly liquid option also because you can anytime sell the gold fund units like any other mutual funds unit.

5. E-Gold

E-Gold was launched some time back in India from the exchange called NSEL, which also has other commodities like Silver and Platinum in e-format. It’s very much like Gold ETF, where you can invest in Gold in an online format.

For investing in E-Gold you still need a Demat account, but with one of the companies authorized by NSEL (list here). The best part of this option is that you can also take physical delivery of gold with some terms and conditions.

But the sad part is that not all big broking houses Demat account can be used to buy this, you need to open another Demat account for this and this option is not too popular with retail investors.

When should you buy it?

You can buy this if you need physical delivery of gold at some future point of view, but you also want to benefit from the online advantages like the market price and no storage cost at your side.

Read more about this in detail here

6. Gold Futures

One more option to invest in Gold is through Gold Futures, but I would like to call it more of trading activity and not “investment” because of its short term in nature. You can use Gold Future to protect the pricing.

If the price of gold today is Rs.30,000 and a 3-month gold future price is 30,500, then you can lock the price at this moment to 30,500, so that when you want to buy the gold after 3 months, you get it at 30,500 only. This would require a little bit of knowledge on how future’s work.

When should you buy it?

This option is a bit more technical and one should only use it if you have a decent amount of knowledge. Do this if you want to lock the price of gold which you want to buy in the future if you fear that prices can go very high.

Which option are you going to choose and why? Are you now clear on how to invest in gold as per your condition? Leave your answer in the comment section.

Why Should you invest in gold?

Gold investment is one of the traditional ways of investment, that we are observing since childhood. It is one of the most trusted investment tools. Let,s see some of the benefits of gold investment, because of which a lot of investors prefer to invest their money in gold.

4 reasons to invest in GOLD

There are many reasons why we shall look beyond conventional Fixed Deposits, PPF and high growth Shares and Mutual Funds. Gold is always seen as a thing to own and only for consuming as ornaments, for jewellery but seldom as an investment purpose, in fact silver also for that matter.

But now there are many reasons to invest in GOLD, just like people invest in Shares, Mutual funds, PPF, NSC, and Fixed Deposits.

Reason 1: Stock Markets are becoming risky and uncertain

Stock Markets are in Bad shape for at least short or medium-term at least. No one knows whats going to happen in 6 months or 1 year or 2 years. Long term may be good but still, a medium-term perspective is not very clear.

Not only the Stock Market but the whole of financial Markets are uncertain if you consider problems like Inflation, dip in projected GDP growth of economy, etc.

Reason 2: It acts like a hedge towards Inflation and Foreign currency

As the Indian currency is gaining against Dollar and other currencies, Rupees is set to become more strong in the coming years. Gold has an inverse relation with Dollar.

https://news.goldseek.com/SpeculativeInvestor/1171382460.php

In the future as Dollar weakens, GOLD will become more strong.

Reason 3: Its a relatively less known investment option and has high potential in future

Looking at history, and every time we see that an investment option starts becoming popular and by the time most people know about it, it already gives most of its returns and becomes a talk of past.

GOLD has started gaining attention as an investment option and becoming popular and still in its middle stage, if not early.

So it’s the time to ride the boat.

Reason 4: Future High Demand and less supply

In future gold is going to in high demand and it’s already in less supply, so according to the demand-supply logic, the prices are bound to go up in the near future. Indians account for 23% of the world’s total annual consumption and overall global demand has increased 15% year on year

Gold demands were on an all-time high in 2007 and expected to increase in the coming years due to mismatch in demand and supply.

Reason 5: More Diversification 

Before some time back, diversification of portfolio was limited to Equity, Debt and Real Estate and some cash, so that your risk is spread across different class of assets. GOLD has evolved as another asset class and not it help in diversifying your portfolio.

I hope this information will help you to choose the better option of gold investment. If you still have any doubts, you can leave your query in the comment section.

8 graphs on gold price movements (86 years data)

Posted on by Jagoinvestor

Today I want to show you some patterns of gold prices from last few decades. There is no interpretation or conclusion but some findings and observations on gold price fluctuations in India. From last 10 yrs gold has been on a bull run and prices have multiplied many folds. In the last couple of weeks, gold prices have been extremely volatile and some analysts also predict that gold price upside movement is in threat. So I found gold prices for last 86 yrs (1925 – 2011) and did some number crunching and some graphs from which we get some interesting findings.

Gold Historical Prices

4 yrs Gold Price difference (absolute returns

I found out the price difference for every 4 yrs period i.e. from 1928 to 1925 (yrs) and saw what exactly was the difference in the prices, then 1929 – 1926 and so on… till 2007-2011. Just to give you an idea, gold price in 2008 was 12,500 and in 2011 it was 26,400; so the price difference was 111.20%. I used these data to plot a running 4 yrs price difference so at any point of time you can see how much was the return in those 4 yrs prior to that point. Note that this change in absolute in difference.  The major point to note is that majority people think that gold has performed outstanding post 2000 in a time frame of 4 yrs. But from the graph you can see that in 70’s time the 4 yrs period return was much more than what investors saw in recent time.

 

Gold Historical Prices

8 yrs Absolute Price difference runnin

This one is just like above chart, but this time its 8 yrs price difference. We are trying to catch that was the price change in an 8 yrs period. So for example, price in year 1980 was Rs 1330, then after 8 yrs – in 1987, the price was Rs 2570, which is a 93.23%… So like this I calculated the price difference for all the 8 yrs period and graphed it. There are very less 8 yr holding period when the returns from gold was negative, that happened 50’s and 60’s and just 90’s end.

Gold Historical Prices

4 yrs CAGR running

The next chart is the CAGR return chart for 4 yrs time frame and the graph is for running periods… that means 1925-1928, 1926-1929… 2008-2011. CAGR return is the main indicator of the performance of any instrument. If you look at the chart below you can see the ups and downs in gold performance and you can see how gold has performed in short run (4 yrs period) for a long time line. You can see that gold returns touched 20%-25% in 70’s and even in recent time it has performed wonderfully… which we all are aware of :).

Gold Historical Prices

8 yrs CAGR running

Then you can see the graph below which shows CAGR return on 8 yr running period. The interesting a little obvious fact is that it hardly gave any negative return in any 8 yrs time frame, only during 50’s and late 90’s it has performed badly.

Gold Historical Prices

20 yrs CAGR running

The real test of gold comes from a very long term performance and if we see a 20 yrs CAGR return on rolling basis (1925 – 1944, 1926-1945… 1992-2011), then you can see that most of the times the returns has been in the range of 5-10% and only in the 80’s people got best return if they had bought it in 60’s.

Gold Historical Prices

CAGR from 1926 (base year)

This chart is interesting; it calculates the CAGR return of GOLD from 1926 to all the years. I mean CAGR return from 1925- 1926, 1925-1927, 1925-1928 and then 1925-2011… So the base year is always 1925. This shows you what was the very long term CAGR return of gold considering it was bought in 1925. In a way this does not give us very strong conclusion, but still shows us some perspective.

Gold Historical Prices

CAGR from 1960 (base year)

This graph is same as above just that the base year taken was 1960 so considering gold was bought in 1960, the graph shows the CAGR return for different holding periods. You can see that apart from those who sold the gold in 80’s realised the best CAGR return, but those who held it for long, still have the returns in range of below 10%.

Gold Historical Prices

CAGR from 1980 (base year)

The last chart I want to show is with base year of 1980, you can see that over the long term the returns have converged to 10% & only in the last 10 yrs you can see the returns again going up.

Gold Historical Prices
What are your conclusions based on these charts ? What do you think about gold price movement from this point onwards ?

Difference between Gold Saving Funds and Gold ETF ?

Posted on by Jagoinvestor

Today we will see what is the difference between Gold Saving Funds and Gold ETF’s .

The biggest marketing pitch for selling the Gold saving fund is that one can invest in gold funds without a demat account and can set a SIP for the same, which is true.

However, the alternate option of Gold ETF’s doesn’t not allow investments and/or SIPs without a demat account. But most of the agents hide these details of costs and do not educate their clients on how things work!

how to invest in gold

Source : Kotak Website

As of today, Reliance, Kotak and Quantum have launched their Gold Saving Funds of Funds. All of these Gold saving funds are almost same. Lets take an example of Reliance Gold Saving Fund, which is nothing but a fund of funds which invest in their respective Gold ETF’s 🙂 Did you know that?

Difference between Gold Saving Funds and Gold ETF’s ?

Gold ETF’s :

Let’s understand this for a moment. In simple terms, these are financial products which invests in physical gold and tracks its pricing on day to day basis. These ETFs have their own expense ratio which is considered very high if compared to US market, but that’s the price we pay to invest in gold electronically.

You need a demat account to invest in Gold ETF and you can trade these ETFs through stock exchange.

Gold Saving funds

Gold savings funds are nothing but mutual funds which invests majority of its corpus (90%-100%) in Gold ETFs (of the same sister company), a small portion might also be in money market instruments or some short term debt products.

For example –  Quantum Gold Saving Funds of Funds as per its mandate can invest anywhere from 95%-100% in the units of Quantum Gold ETF’s, and rest in money market instruments and other short term debt products.

But the important point you should note here is that the underlying investment is still gold, but not directly! It’s indirectly through gold ETF’s, and now as there are two layers in between, you pay charges two times!

So you pay charges for Gold saving funds and also for gold ETF’s, this part is generally not revealed by the agent who sells you these Gold saving funds. Also for the gold saving funds there are high exit load’s 🙂

Gold Saving Funds

So which one is better and which one you should choose?

We can’t make a general statement that one is good and the other is bad, because it’s not like that. If someone does not have a demat account and wants to automatically invest in gold each month through SIP, gold saving funds are the best option.

But for someone who is conscious about the expenses and can invest through his demat amount each month, Gold ETF’s are a good option.

But high charges will surely hurt in long run! One important point is that do not confuse gold saving funds with “gold mutual funds” which are mutual funds investing in gold mining companies, they are totally different.

Gold Saving Funds

Conclusion

A lot of investors are lured into these gold saving funds without giving any information on the charges, which is not right. Gold saving funds over a long-term can really eat away your returns because the high charges will cut a big pie out of the returns earned.

Silver prices vs Gold Prices in India

Posted on by Jagoinvestor

Imagined what gave maximum return in 2011 or 2010? Well, was it Gold, Equity or Real estate? Nope! Hold your breath, it was SILVER and it gave huge returns! It is almost unbelievable that the price of silver as on Aug 2008 was around Rs. 20,000/ Kg, and it went to Rs. 72,000 by the end of Apr 2011, which was a 300% absolute rise in less than 3 yrs. But don’t get too excited, Silver in just 1 week has fallen like anything. From the peak of 72,000 in Apr 2011 end, it went down to Rs 52,000 in just 1 week. Can you believe that? A 28% fall in the prices of silver in just 7 days! Let’s explore more on this.

Silver prices vs Gold Prices in India

Gold vs Silver returns ?

Now a days there is a big debate going on different TV channels as well as newspapers that what should a common man buy? Gold or Silver?

In our country, Gold is something which every family buys because of the attraction we have for this metal. On any occasion, gold is the obvious choice. But Silver is not seen the way gold is looked upon. It’s generally limited to not so well off section of the society. This is one of the reasons why middle class or even richer one’s never considered looking at what’s happening in silver and if it can have some potential in future as an investment option. Gold, Gold and Gold was the only option when it came to buying some precious metal.

A lot of people are surprised to hear and see how gold has given fabulous returns year on year in the last decade, but now you would be more surprised to know that for most of the years silver has outperformed gold with good margins in terms of returns. For example, everybody knows that Gold gave 25% return in 2010, but not many know that Silver in the same year gave 80-85% return.

Silver has given 24% absolute return in just one month of April 2011. I don’t think it’s anything other than speculation because that rise was short-lived and in just 1 week (May-‘11 first week), all the gains made in Apr disappeared and prices fell by 25%.

Below is the chart which shows you the monthly price movement in silver for last 30 months. You can see how silver prices exploded in last 4-5 months (2011)

Silver Price in India

Factors affecting price of gold and silver

1 . Supply and Demand

One of the biggest and obvious reasons behind the price movement for anything is its demand and supply in the market. It directly impacts the movement in price. It is estimated that in 1950, the reserves of gold was 1 billion ounces, but by 2010 it increased by 700% to 7 bullion ounces (see the video below)

However on the other hand it is totally different with Silver, in 1950s there were 10 billion ounces of silver, but by 2010, it dropped by huge 95% and its current reserves are only 500 million ounces worldwide. A very obvious reason for this is that gold is mainly stored in form of bars, jewellery etc and its recycled again if required. However silver is also used widely in Industry in very smaller and thin parts which get lost and never reused. In fact, it is not possible to use it again because of its used in lesser quantity and in small parts.

Gold and Silver

2. Practical use in life

Gold and Silver are very different when it comes to its usage in real life. While both of them are precious metal and often used as jewellery, Gold has a very different image and can be considered as the undisputed king in this area. From millenniums Gold stands the most favourite metal for jewellery, in fact there is some kind of unseen connection which humans have with gold, which cannot be explained. May be it’s the way it has always been and it can’t be changed. But if you see gold as a useful metal, it does not have much to show off. It’s literally not used anywhere other than at a few places.

Silver on the other hand is also used in various industries and holds a very important position. In fact you can see it as “gold” for industrial use. Let me give you more info on this. Silver is used in Bandages, batteries, soldering process, cell phones, computers, satellites, high-tech weapons, laser and digital technology, electronics circuit board, solar cells, water purification, RFID chips and the list goes on.

Silver has more industrial applications than any other metal. A recent report by Hinde Capital says: “It’s the best conductor of both heat and electricity, the most reflective, and second-most ductile and malleable element, after gold.” The white metal is also being put to several new uses like-water purification, air-handling systems and a natural biocide.”

In last couple of decades, Silver is so extensively used in Industry that it’s reserves has drastically gone down. Just to give you an example, in the decade of 1990 – 2000, around 2 billion ounces of Silver was consumed. That’s a lot of silver!

3. Role as alternate currency

Precious metals are always considered as the alternate currency and wealth in pure form in any emergency situation. Gold is a universal currency and not dependent on country or any community.

In times of war, people fear that their assets may be seized and that the currency may become worthless. They see gold as a solid asset which will always buy them food or transportation. Thus in times of great uncertainty, particularly when war is feared, the demand for gold rises. That’s exactly what happened in Zimbabwe lately, where currency is worthless now and people are using gold as alternate currency to buy bread

Recent rise in Silver Prices

You might have heard lately about rise in Silver prices and definitely you might have felt that you “missed the bus”. Let me talk a bit on that. You have already read about the reasons of price rise in silver above. One of the biggest reasons is fundamentals of silver, it is a valuable asset and over a long-term, it’s going to be much valuable because of its use in industry, every industry requires silver!

But other than fundamentals, there are elements of speculation also involved, otherwise I don’t see any reason for 150% rise in its prices in just 1 yr and then a 25% fall in just 1 week. It’s going to be volatile.

To know why the price of silver fell recently , read this article . Please share your comments on Gold and Silver as an investment .

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

Posted on by Jagoinvestor

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 .

Is Gold worth Buying ? A shocking Study

Posted on by Jagoinvestor

To understand this Study, we have to go back to years when human civilization started. Surprised! But yes, lets go back to those times where human civilization just started. Those days, economic activity was bare minimum and there were few trades between humans. For example, if a farmer wanted to build a home, he used to give some quantity of grain to carpenter, plumber etc and that system was called BARTER SYSTEM. So goods itself were basically used as currency.

Economic activity grew and then emerged an alternative currency which was in the forms of coins and we had what is called ASHRAFIYA. We had gold, silver and copper coins which were used as currency and it was Emperor who used to control the currency system. Then economic activity picked up further and since there was a limitation to the amount of gold, silver and copper we had, Paper currency emerged and till date such currency is the main form by which we all trade. Though now-a-days, we are witnessing another form of currency which is called Plastic Card Currency/ Credit Currency which if not used judiciously, can be a disaster. In fact,the entire US came to a halt in 2008 as credit currency was mis-used to unimaginable extent.

Today also, each emperor (so called Government) produces and controls their own currency as DOLLOR, Rupee, Dinar etc. But internationally, gold still remains the purest form of currency as it cannot be manipulated. Now in paper currency world over, Dollar became the most acceptable currency as US economy is still the biggest and almost all countries trade with US. After US dollar, the most acceptable form of currency is GOLD. If you have gold and you are not carrying dollar, you can still buy items in any country of the world but you cannot do so with Indian Rupee. Hence, in economic terms, gold is a currency.

 

 

Gold in relation to Dollar

Gold is a recognized international currency and currently Dollar is the most recognized Paper Currency. Hence gold is valued in terms of Dollar and not in Rupee. Now if we go back in the history, in the year 1976-81, gold had a dream bull run. From $100 per ounce in 1976, it had gone as high as $850 per ounce. That rise took place as people feared that US economy would collapse and $ would have no value. That time, US was in war with Vietnam & then came Iranian Revolution – inflation in US was at very high levels and in a way, there was hyper-inflation.

Once the war was over and inflation eased out, Gold came crashing down. In the year 1990, it was $400 per ounce and in the year 2000, it was close to $250 per ounce. That means the effect of bubble was so big that even in 20 years, the gold could not recover its original price and was languishing at less than 1/3 of its peak price. So please don’t be surprised if you will be able to buy gold again at levels of Rs 10000-12000.

 

Gold Price Chart from 1975 to 2010

Now, Dow Jones was at 10000 in the year 2000 and today also it is at same levels. The US economy is in bad shape and in last 10-12 years, it has not really made any significant progress, rather its debt is so much so high, that there is a fear that US would only have to print further paper currency i.e., dollar either to repay the loan or to keep in the economy going. The moment any government print notes without significant growth in the economic activity, the currency loses its value because of high inflation as same quantity of goods and services are being chased by more money. Anyway, US government is printing billions of dollar just to keep the economy afloat.

 

So, the rise in Gold is happening on the background that the most recognizable international currency is loosing its value. If US economy further goes down and government there keeps printing notes, again gold may rise in dollar terms. Such fear exist, even in 1979-80. We don’t know what lies ahead as we are not astrologers.

Dollar in relation to Rupee

In the year 1980, $1 was equal to Rs.8 and today as we are writing this article, $1 = Rs.46. Dollar has appreciated more than 5½ times in last 30 years. In the year 1991, there was a time, when Indian government was literally bankrupt and they had to devalue INR more than 25% in just a single day, just to repay the debt we had. That was the time, India was liberalized and government opened their economy and allowed foreign companies to do businesses. Since then, India has grown dramatically. The fact of the matter is that in the year 1991, sensex was close to 1000 and today it is at 18000.

As Indian economy keeps rising and US economy keeps doing down or at the max stands where it is, the likelihood is that dollar should depreciate. In the year 2007, dollar had depreciated to as low as Rs.37.

Gold with relation to Rupee

Gold was Rs.1450/- in the year 1980 and today it is Rs.18800/-. The rise of 13 times in last 30 years @ 9% p.a. But 5½ times of such rise is on account for Rupee depreciation in terms of dollar. So if we were to analyse the rise in gold price in relation to rupee alone without taking dollar factor, it is only 2.35 times. You see, even in terms of dollar, gold has risen only 1.5 times in last 30 years.

What can happen in future?

As we have said, we are not astrologers, so we can’t predict future. Though we can give some options that may happen:

  1. If dollar in comparison to INR were to stay at the same level of 45-46, then there is a likelihood that gold may rise further.
  2. If due to the sheer strength of Indian Economy, dollar flows to India by way of FDI, FII etc continues, rupee would strengthen and that would mean that even if gold were to rise in dollar terms, it will still decline in rupee terms. In fact, as it happened from 1980 to 2000 that gold kept going down in dollar terms but since the rupee was depreciating in dollar terms, the gold kept rising in Rupee terms. The reverse can happen now and gold may decline in rupee terms.

Basically, the price of gold depends on currency movements; for example,  in Yen terms (Japan) gold have moved 240% & in Pound terms (Britain) 390% in the same period (Check below Chart).

And you already know about Gold price in Rupee term. So what do you feel – whether India will grow & its currency will appreciate or economy will slow down & our currency will depreciate further? We don’t know what lies ahead, but looking at the history, we are not bullish on gold as much as we are bullish on Indian Equities. As long as world keep rising, gold will not give much return. Here we would like to add a recent quote of  legendary investor Warren Buffet – “We live in a world where 80 years out of 100 will be good. But we don’t know which 20 will be bad.”

We always used to suggest investors that gold is not an investment, it is an insurance which would save you in case the entire financial markets were to tumble down. The live example is that of Zimbabwe where, paper currency has lost its value and if you are holding paper currency, it is depreciating at a rate which is unimaginable. You have to carry crores of Zimbabwe currency just to buy a loaf of bread. Now if you are holding gold, you can actually buy or barter goods there. At least, you can go to neighboring country South Africa and buy what you want as gold is recognized everywhere.

Now, if an average Indian household were to look at their asset allocation, they already hold more gold in the form of jewelry or otherwise than they hold Indian equities. In fact, Indians are the biggest consumer of gold. One must consider gold as part of asset allocation tool and over-boarding on it may not be that a great idea. It may happen that in short run, gold may give better returns but mind you, it is Indian equities that will create a long lasting wealth for investors.

One more important point to note

It is often said that Gold is a Hedge against Inflation. But if you were to look at the graph below, you would find that gold has not kept pace with rising inflation. The blue line shows the actual price of gold and the red line shows the price which gold should have carried in order to match with inflation

In October 2009 when Gold was $ 1072, Bloomberg made this statement “While bulls say gold is cheap, the inflation-adjusted price is 15 percent above its 30-year average, Bloomberg data show.” First time in 100 years gold has touched it’s inflation price – what will happen next?

What they meant is that it is for the first time that gold price is above its inflation-adjusted price which clearly states that gold is over-priced as it is a sheer currency and nothing else.

Research on investor psychology

The following are Google trend charts. It analyzes a portion of Google web searches to compute how many searches have been done for the terms you enter, relative to the total number of searches done on Google over time. This clearly shows that people start searching for investment which have gone higher in recent past. Check 2nd Graph of Mutual funds which peaked in December 2007 when equity markets were also at their peak. No one was searching for Mutual funds in the end of 2008 or start of 2009 when actually it was the best time to invest. Upto 2007 end when it was best time to invest in gold but no one was searching for it but when price went up, the number of searched went up.

Few points that we would like to leave open for discussion:

  • What will happen if Indians were to start selling gold as it is at its highest price
  • Why IMF sold gold when it was at $ 1045 per ounce
  • Today experts are saying – Buy Gold. why did not they said when gold was at Rs.5000
  • Gold has appreciated 13 times in last 30 years and sensex has appreciated 140 times. Still why Indians love gold more than sensex

But the problem is “The markets can stay irrational longer than you can stay solvent…“. So never try to time the markets/assets & keep a proper asset allocation.

 

This is a guest article by Hemant Beniwal & Ashish Modani. They both are CERTIFIED FINANCIAL PLANNERCM & writes at The Financial Literates.

GOLD or SILVER – Which is the best investment option?

Posted on by Jagoinvestor

Precious metals market is on a roll these days !! GOLD and SILVER are everyone’s Darling.

GOLD

Gold has given good returns from this year start and finally broke its trading range. Its expected to give good returns in future too.

SILVER

Silver has outperformed Gold in 2008 and is expected to do so in future too. But I am hesitant with an idea of buying Silver from some local jeweler. It should be bought from some recognized Bank only as per my view.

I don’t think that its a good idea to buy gold or silver in physical, People who want to do it to invest for marriage and all is OK, but still its only for Investment and to gain from the price appreciation in these metals, the best idea would be to go for ETF’s. They are easy, secure, more cost-efficient and tax efficient.

Some Notes

Silver ETF’s are still to come, currently we only have GOLD ETF’s, so given a choice of investments in precious metals, I would prefer GOLD ETF to Physical Silver even though Silver is expected to outperform GOLD in coming future.

Even GOLD has broke out of its trading range and now its expected to go upto the levels of 1750 per gram, and then upto Rs.2000 levels as expected by some analyst in coming times. See :
https://manishanalysis.blogspot.com/2009/02/gold-breaks-out-from-its-trading-range.html

Guys, When it comes to ETF’s, Benchmark mutual funds are the leaders, that company mainly focuses on ETF’s and manage them in a better way. So there ETF’s are recommended. (that does not mean, others are not good or can outperform them).