Investment in Gold

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Questions and Answers

What is the maximum investment limit for Sovereign Gold Bonds (SGBs)?

5 Kg

4 Kg (correct)

3 Kg

2 Kg

How often is the interest paid on Sovereign Gold Bonds?

Semi-annually (correct)

Annually

Monthly

Quarterly

When can an investor redeem their Sovereign Gold Bonds?

At any time after issue

From the 5th year onwards (correct)

At the end of each year

Only after 8 years

What aspect of SGBs directly tracks the performance of gold?

Market price Signup and view all the answers

What type of taxation applies to the interest income from Sovereign Gold Bonds?

As per tax slabs Signup and view all the answers

Which of the following factors does NOT impact the price of gold?

Stock market performance Signup and view all the answers

What is the assured interest rate provided by Sovereign Gold Bonds?

2.50% Signup and view all the answers

What can lead to an increase in the price of gold during a specific economic condition?

Periods of inflation Signup and view all the answers

What is one advantage of investing in gold ETFs?

Any time entry and exit option Signup and view all the answers

Which type of gold investment primarily serves for consumption rather than as an investment?

Jewellery Signup and view all the answers

What is a common problem faced when investing in traditional physical gold?

High storage costs Signup and view all the answers

Which investment option allows investing with as little as ₹1?

Digital Gold Signup and view all the answers

What is a potential risk associated with gold mutual funds?

Dependence on fund performance Signup and view all the answers

Why might investors prefer gold as a hedge during inflation?

Gold provides consistent returns historically Signup and view all the answers

What characteristic makes gold a valuable asset during crises?

World wide acceptability Signup and view all the answers

Which investment form allows for redemption in physical gold under certain conditions?

Gold Exchange Traded Funds (ETFs) Signup and view all the answers

What typically happens to gold prices when the dollar weakens?

Gold prices increase Signup and view all the answers

How do geopolitical tensions generally affect gold prices?

They increase demand for gold Signup and view all the answers

What is one of the key factors that can influence the demand for gold?

Interest rates Signup and view all the answers

Which of the following is an industrial application of silver?

Electronics Signup and view all the answers

What is a common characteristic of silver coins as an investment option?

They have higher labor costs associated with them Signup and view all the answers

What is digital silver or e-silver, as offered by the National Spot Exchange?

A way to invest small amounts of silver in a Demat form Signup and view all the answers

What is the role of SEBI in regulating silver ETFs?

To safeguard the rights of the investors in silver ETFs Signup and view all the answers

Which of the following statements is true about silver bullions and coins?

Silver coins are generally more expensive due to added labor costs Signup and view all the answers

What is a key feature of Exchange-traded Funds (ETFs)?

They are intended to replicate the value of an underlying asset. Signup and view all the answers

Which of the following factors does NOT affect silver prices?

Subscription Rates Signup and view all the answers

What is the purpose of Gold ETFs?

To give investors exposure to gold prices without owning physical gold. Signup and view all the answers

Which of the following is an example of a Silver ETF listed?

HDFC Silver ETF Fund Signup and view all the answers

Which category does NOT belong to the modern uses of silver?

Currency storage Signup and view all the answers

How is the composition of Gold ETFs typically backed?

By physical gold stored in vaults. Signup and view all the answers

Which of the following statements about ETFs is incorrect?

ETFs are always a collection of only equity stocks. Signup and view all the answers

Which organization is NOT involved in the production of silver stocks listed?

Nippon India ETFs Signup and view all the answers

Study Notes

Why Invest in Gold?

Portfolio diversification benefits through non-correlated asset class.
Gold has limited supply against ongoing demand, offering stability.
Universal acceptance makes gold valuable during economic crises.
Historically consistent returns, making it a reliable investment.
Easy entry and exit options provide liquidity for investors.
Acts as a hedge against inflation and currency devaluation.

Types of Gold Investment

Traditional/Physical Gold: Includes coins, bars, and jewelry; primarily for consumption.
Gold Mutual Funds: Invest in gold-related securities and ETFs; suitable for small investments.
Gold ETFs: Trade on stock exchanges, representing physical gold ownership.
Digital Gold: Allows small investments; maintained in physical form by intermediaries.
Sovereign Gold Bonds (SGBs): Government-backed securities denominated in grams, offering semi-annual interest.

Advantages and Disadvantages of Physical Gold

Advantages:
- Convenient purchase options.
- Possible cash transactions, high liquidity.
Disadvantages:
- Risks of theft and loss.
- High making and storage charges.
- Difficulty in purity detection and lack of standard pricing.

Gold Funds and ETFs

Investment in mutual funds that focus on gold-related assets; options for both entry and exit anytime.
SGBs track gold prices and have an eight-year tenure with early exit options.
Interest of 2.5% per annum, capital gains tax exemption after five years.

Factors Impacting Gold Prices

Supply and Demand: Influenced by mining outputs, recycling, and industrial demand.
Central Bank Policies: Interest rate changes and policy adjustments shape market sentiment.
Inflation and Deflation: Prices typically rise during inflationary times.
Currency Strength: Weaker dollar makes gold affordable for non-dollar investors.
Geopolitical Tensions: Market uncertainty drives investors toward gold as a safe asset.
Interest Rates: Changes affect opportunity costs associated with gold holdings.
Market Sentiment and Speculation: Influences short-term price fluctuations.
Technological Advances: Innovations can reduce industrial demand for gold.

How to Invest in Silver

Bullion: Available in bars or coins, with bars being generally cheaper.
Silver Jewellery: More affordable and popular among consumers.
Silver Coins: Ideal for small investments, widely accessible.
Digital Silver: Trades on national exchanges in a Demat form.
Commodity Futures: Offers trading in silver contracts.
Silver ETFs: Regulated funds that track silver prices and safeguard investor rights.

Factors Affecting Silver Prices

Supply and production levels directly influence market availability.
Industrial demand fluctuations are key to price movement.
Inflationary pressures and gold prices can indirectly affect silver valuations.

Exchange-Traded Funds (ETFs)

ETFs replicate the value of underlying assets and are traded on stock exchanges.
Offer access to a variety of markets, encompassing stocks, bonds, and commodities.
Gold and silver ETFs allow investment in precious metals without physical possession.

Gold ETFs

Composed of physical gold stored in secure vaults.
Enable exposure to gold price movements efficiently without storage concerns.

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Description

This quiz explores the reasons for investing in gold, highlighting its benefits such as portfolio diversification, limited supply, and historical returns. It also discusses gold's role as a hedge against inflation and currency devaluation, making it a valuable asset during economic crises.