Investment in Gold - Neha Shah PDF

Investment in Gold Neha Shah  Why Invest in Gold? Portfolio diversification Limited supply and ongoing demand It has world wide acceptability, hence, valuable during crises Historically, it has provided consistent returns. Easy entry and exit options for investors. Hedge against infl...

Investment in Gold Neha Shah  Why Invest in Gold? Portfolio diversification Limited supply and ongoing demand It has world wide acceptability, hence, valuable during crises Historically, it has provided consistent returns. Easy entry and exit options for investors. Hedge against inflation. Stabilizes Against Currency Devaluation 2 3 4  1. Traditional or physical Gold 1. Coins, Bars 2. Jewellery 2. Gold Mutual fund How to Invest 3. Gold Exchange Traded Fund (ETF) in Gold? 4. Digital Gold 5. Sovereign Gold Bond Though Popular, But Purchasing Jewellery Is Not Same As Investment In Gold. It Is Primarily For Consumption Or Usage. Gold Investment in Traditional or Physical form Advantages Problems Easy and convenient Threat of theft / loss purchase Making charges Cash purchase is possible High storage cost High liquidity Difficult to detect purity Lack of standard pricing 6 Investment in Gold Funds It is like any other mutual fund. AMC invests in gold, securities of gold mining companies and Gold ETFs. Any time entry and exit option for investors.. Advantages Small amount of investment - ₹500 or more. SIP option available. Problems Returns depend on fund performance. 7 Gold Exchange Traded Fund Similar to mutual funds which invest in gold and which are traded in stock exchange. Any time entry and exit option for investors.. Small amount of investment is Advantages possible. SIP option available. Investor holding equivalent of 1 Kg gold ( or its multiple) in ETF may opt for redemption in physical gold. Problems Returns depend on fund performance. 8  Digital Gold Similar to buying physical gold. By paying money, you get a notional credit in your gold account. The intermediary selling digital gold maintains inventory in physical gold. Any time entry and exit option for investors.. Advantages You can invest even ₹ 1. SIP option available. Option to get delivery in physical form. Not a regulated product. Stock brokers are restricted from offering this product. Problems Intermediary cost and taxes makes it expensive comparatively. 9  Sovereign Gold Bond SGBs are relatively a new form to invest in Gold, introduced in 2015. They are government-backed securities denominated in grams (gms) of gold and were launched to act as substitutes of holding physical gold. They are issued by RBI on behalf of GoI with an assured interest of 2.50% per annum, paid semi-annually on the original investment value and not the current market value of gold. SGBs are denominated in units of grams of gold with a basic unit of 1 gram, with the maximum investment of 4Kg. SGBs are issued through limited-period offers that are open about 5-6 times a year. At the time of opening of subscription, the investors have to pay the issue price of the series. 10  Sovereign Gold Bond The SGBs are designed to track the price of gold. So the returns you can expect from these should be similar to returns from gold prices. The tenure is 8 years, with an option for early exit from the 5 th year onwards. So if an SGB subscriber wants, they can redeem their investments in the 5th, 6th, 7th and 8th years (on interest payment dates). They are tradable on the stock exchange withing 14-15 days of issue and can be sold in the secondary market before the 5 th year. Purchase and Redemption price are based on prevailing market price. Interest income is taxed as per tax slabs and if held for more than 5 years, then capital gains tax is exempted 11 Factors Impacting Gold Prices  Supply and Changes in mining output, recycling rates, and industrial demand can demand impact the availability of gold in the market. Central banks’ buying or selling activities can influence prices. Monetary Central bank policies such as interest rate decisions and quantitative easing programs policies also affect investor sentiment Gold prices tend to rise during periods of inflation. Conversely, gold may Inflation and lose some of its appeal during deflationary periods as investors seek assets deflation with more stable returns. Currency strength Gold is priced in U.S. dollars, so a weaker dollar typically boosts gold prices, making the metal more affordable for investors holding other currencies. Political instability, conflicts, and geopolitical tensions can increase gold Geopolitical demand. Uncertainty in global markets often drives investors towards gold tensions as a store of value. Gold competes with interest-bearing investments such as bonds and Interest rates savings accounts. Changes in interest rates can influence the opportunity cost of holding gold, affecting demand. Investor sentiment and speculative trading activities can have a significant Market sentiment short-term impact on gold prices and can all drive fluctuations in gold and speculation prices. Gold has various industrial applications, particularly in electronics and Technological technology. Technological advances that reduce the demand for gold 13 can advances impact prices How to Invest in Silver?  How to Invest in Silver? Bullion Silver bullions are traded in the commodities market. Silver bullions are also available in the form of coins, but they generally are more expensive than silver bullion bars. Silver Jewellery Silver as a form of jewellery is also well known mainly because it is more affordable than gold. Silver Coins This is a preferred investment option for many middle-class families as they are easy to purchase and can be easily stored at home. Silver coins are perfect as small investments. Price-wise they are more expensive than silver bars as the price of labor of making the coins, imprinting images and letters on them are added to the final price. 15 How to Invest in Silver? Digital Silver on National Spot Exchange An innovation of the National Spot Exchange is digital silver or e-silver that lets investors put in their money in smaller chunks and hold their purchase in a Demat form. Commodity Futures You can trade in commodities futures in the commodities market. Silver ETFs Silver ETFs track the spot price of silver in the open markets. Fund managers of a silver ETF purchase silver and store them in secure vaults. SEBI safeguards the rights of the investors by regulating these ETFs. 16  Where Can One Trade Silver in India? MCX Equity ETFs Stocks with base as Physically Futures and Options silver HDFC Silver ETF Fund of Hindustan Zinc Fund - Direct Plan Vedanta Resources Ltd Goldiam International Ltd Edelweiss Gold and National Mineral Silver ETF Development Corporation Nippon India Silver ETF (NMDC) FOF - Direct Plan Thanga Mayil Jewellery Ltd 17 Top Modern Uses of Silver Silver Prices are Linked to Economic Cycle 18 Factors Affecting Silver Prices Silver Supply & Production Scrap Demand Metal Industrial Inflation & Gold Demand USD Prices 19 20 ETFs An ETF is a MF Scheme or security that endeavors to replicate the value of an underlying i.e index or a commodity & listed on the exchange 21 Exchange-traded Funds (ETFs) ETFs are a type of investment that trade on stock exchanges like stocks and provide access to a variety of markets. They are a collection of assets, such as stocks, bonds, or commodities, that track a specific index or other asset Gold ETFs and Silver ETFs are exchange-traded funds that offer investors the opportunity to invest in precious metals like gold and silver, respectively. The units of these ETFs are traded on stock exchanges and can be bought and sold like any other stock. 22 Gold ETFs Composition: Typically backed by physical gold, meaning each share of the ETF represents a certain amount of gold, stored in vaults by the fund issuer. Purpose: Allow investors to gain exposure to gold prices without needing to buy and store physical gold. Uses: Commonly used as a hedge against inflation or economic uncertainty because gold is often seen as a "safe- haven" asset. 23 Silver ETFs Composition: Generally backed by physical silver or silver-related assets or securities, similar to gold ETFs. Purpose: Provide investors with exposure to silver prices without having to own physical silver. Uses: Silver is often seen as an industrial metal as well as a store of value, so silver ETFs can be used for both speculative purposes and hedging. 24 Advantages of ETFs Convenient Cost-effective Minimal investment required Liquid Transparent and easy to track price 25