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8/8/2019 Gold as an Investment Class[1]
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G old gives to the
ugliest thing a,certain charming air
For that without itwere else a miserableaffair
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Yellow Fever
By:
Anand SharmaJharna Talreja
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W h y G o ld a s a n
In v e stm e n t?
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Long-term store of value
Asset of last resort
Highly liquid
Asset diversifier
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Jargons used in gold investing
BID/ASK: Bid or buy is the price a dealer is prepared to pay
for gold bullion. Ask or sell is the price offered bythe seller.
BULLION: Refined gold that is at least 99.5% pure, usually in
the form of bars, wafers or ingots.
BULLION COIN: A legal tender coin whose market price depends on
its gold content, rather than its rarity or face value.
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FACE VALUE:
The nominal value given to legal tender coin orcurrency (for example a 1-oz. gold American Eaglecoin has a face value of $50).
FUTURES CONTRACT: A firm commitment to make or accept delivery of a
specified quantity and quality of a commodity on aspecific date in the future.
GOLD STANDARD: A monetary system based on convertibility into gold;
paper money backed and interchangeable with gold.
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LEGAL TENDER:
The coin or currency which the national monetaryauthority declares to be universally acceptable as amedium of exchange; acceptable for instance in thedischarge of debts.
LIQUIDITY:
The quality possessed by a financial instrument ofbeing readily convertible into cash without significantloss of value.
NUMISMATIC:
Coins those are valued for their rarity, condition
and beauty beyond the intrinsic value of their goldcontent. Generally, premiums for numismatic coins are
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OPTION:
The right, (not the obligation), to buy or sell a commodity or afinancial security on a specified date in the future.
PREMIUM:
The amount by which the market value of a gold coin exceedsthe actual spot value of its gold content. Part of the premium isrecovered by the seller at resale.
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SPOT PRICE: Sometimes referred to as the cash price.
The current price in the physical market forimmediate delivery of gold.
SPREAD: The difference between Bid (the price a
buyer is prepared to pay for gold) and Ask(the price a seller offers) prices.
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B e n e fits o f In v e stin g in G o ld
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Long term asset of value
Value not affected by the economic
policies of the issuing country or
undermined by inflation
24-hour trading, a wide range of buyers
Wide range of investment channels
available
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Extremely Liquid
As a Hedge against Inflation
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Pro vid e s d ive rsifica tio n to th e p o rtfo lio a n d re d u ce s
p o rtfo lio s risk
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Risks of Investing in Gold
Market Risk
Gold isn't indestructable - It can belost
Does not earn investment interest
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Top Ten Gold-Producing Countries
1. South Africa2. United states3. Australia4. Canada5. China6. Indonesia7. Russia8. Peru9. Uzbekistan10. Ghana
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Average Annual Supply
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Average Annual Demand
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Fixing gold prices
London Gold Fixing or Gold Fix a procedure tofix gold price on the London market
Done by the five members of the London GoldPool representatives from five bullion-trading firms
Provides a recognized rate - used as abenchmark for pricing the majority of goldproducts and derivatives throughout theworld's markets
Conducted twice a day by telephone, at 10:30GMT and 15:00 GMT.
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Main gold marketsaround the world
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New York
London
Zurich
Hong Kong
Sydney
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Gold bars and coins
Gold certificates
Gold jewellery 16000 tonnes of gold with Indian
households
Gold Investment Accounts Allocated and unallocated
Exchange Traded Funds
Blue chip gold Mining Stocks
Gold Future options and contracts
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Should gold be a part of the
portfolio ?
What percentage of theportfolio should it constitute?
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Costs Involved
Physical Gold
No entry and exit barriers
Capital gains tax as per the IT act
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Gold ETFs
Like non-equity mutual funds for thepurpose of taxation
Short term capital gains (STCG) tax if
held for less than one year and longterm capital gains (LTCG) tax if theperiod of holding is more than ayear
No Entry/Exit load (except NFOswhere it is 2-3 %)
Minimum amount Rs 5000-10000
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Why should an investor invest inGold ETF?
No worry on adulteration and storage
Held in Electronic Form
Ability to buy single share
Extremely Liquid - the chance to sell when the
price is going down and buy back evencheaper (selling short), and the chance tobuy without having the money right then topay the broker (buying on margin)
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Potentially cheaper
Quick and convenient dealing through demataccount
No security issue for investors
Transparent pricing
Taxation of Mutual Fund
Ideal for retail investor as minimum lot size totrade is one unit on secondary market
NAV of a unit will track price of approximately or 1 gram of gold
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Benchmark Mutual Fund - Gold Benchmark ExchangeTraded Scheme (NSE Symbol: GOLDBEES)
Kotak Mutual Fund - Gold Exchange Traded Fund (NSESymbol: KOTAKGOLD)
UTI Mutual Fund - UTI Gold Exchange Traded Fund(NSE Symbol: GOLDSHARE)
Reliance Mutual Fund - Gold Exchange Traded Fund(NSE Symbol: RELGOLD)
Quantum Gold Fund - Exchange Traded Fund (ETF)(NSE Symbol: QGOLDHALF)
Gold ETFs available in India
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Thank You