TKW'S INSITITUTE OF BANKING AND FINANCE

TARUN VERMA

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INTRODUCTION Gold is the most popular as an investment.

Investors generally buy gold as a hedge or harbour against economic, political, or social fiat currency crises . The gold market is subject to speculation as are other markets, especially through the use of futures contracts and derivatives.

Gold price has shown along term correlation with the price of crude oil. This suggests a reason why gold is sold off during economic weakness.

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TYPES OF INVESTMENT IN GOLD

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PHYSICAL GOLD One can buy physical gold

from a reputed jeweller. This can be bought as bars/coins of pure gold or as jewellery. Now-a- days most banks also sell gold coins. Buying physical gold has high transactional costs and also if bought from a non-reputed jeweller, it also has risks in terms of getting duped on purity of gold.

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E - GOLD E-gold is ‘electronic -gold’

and is held electronically in the demat form. In India, e-gold is offered by the National Spot Exchange Limited (NSEL).An investor needs to register as a client with any NSEL member. Once purchased, a person has the option of converting the e-gold into physical gold. The minimum quantity of conversion is 1 gm.

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GOLD ETFs Gold ETFs are exchange

traded funds that have an investment objective to generate returns that are in line with the performance of gold. Some portion of cash in these funds is also invested in Debt Securities and Money Market Instruments.

The minimum investment for a Gold ETF is one unit of gold. Generally an ETF will charge the investor 1-1.5% as fund expenses.

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GOLD FUNDS Typically in an ETF, one

needs a demat and trading account to transact. If one doesn’t have these, one can still invest in gold ETFs via Gold Funds. Gold funds are fund of funds where the fund would invest in an underlying ETF.

The advantage of this to the investor is that he/she can now invest in gold like normal mutual funds and can also avail automatic SIP facility.

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CONCLUSION You own a demat account gold ETFs are the best

form of gold investment for you. If you don’t, choose gold mutual funds. E-Gold needs time to mature as a product and the separate account requirements are too demanding for those not accustomed to trading. While jewellery has value as consumption article, gold bars and coins should be avoided.