gold as an investment class[1]

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

gold as an investment class[1]

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