Almost every one want to possess Gold and the thirst for Gold is growing day by day. There are 6 ways you can buy Gold
In physical form
and in Dematerialised form
a. Through Mutual funds
b. Exchange traded fund and
c. E gold – through commodity exchange.
There are basically two reasons for buying Gold.
a. To buy jewellery and wear the same . This is a personal satisfaction and this not be equated in monetary terms.
b. As an investment mode, to accumulate in Gold, to create a wealth for future and as an asset class, part of asset allocation.
Many a times, poeple justify that they are buying Gold as jewellery and also as an investment.
Possession of Gold in physical forms, comes with associated risks
– burglary and theft and sometimes murder.
– storage / safety.
In spite of this, people want to possess the Gold in physical form and I want to suggest an option of buying Gold in physical form and also making the best use of it.
Once you buy gold in physical form, there is appreciation only by way of appreciation in price per gram and the investment does not get any interest or income.
Things could change in the future and the Indian government is coming out some interesting scheme on this . Most likely by Jan 2015. Click on the link given below.
This scheme allows people to deposit the gold they have with them in the designated authorities. say ( banks )
The gold you deposit will be verified for purity and credited in your account.
This deposit will earn a yearly interest. Till now there is no scheme where you get interest.
The interest will not be paid in cash or in rupees but will be paid in gold. The interest will be converted to grams of gold. When you redeem, you will get the gold you deposited with the interest you earned in grams of Gold.
You are therefore, increasing your possession of Gold every year, otherwise, it was only lying idle.
However when you buy Gold, understand how you can get the best.
If you are buying jewellery for wearing there is no suggestion as explained it is a personal issue of enjoyment and satisfaction.
If you combine with investment object, buy it either as
Reason : When you buy as jewellery to pay making charges and wastage charges. The making charges and wastage charges in jewellery put together can vary from 8 to 25% or more depending upon the design of the jewellery. (10% wastage and 15% making charges)
You pay making charges and wastage in COIN and to some extent in Bars. These are far lower than the jewellery.
IF the intention is grow your investment by getting interest and income using the scheme mentioned above, reduce the wastage content and making charges.
Since the investment are accounted as gold as a measure of its purity, buy Gold with least of wastage and making charges.
Hence when you want to buy Gold, Prefer to buy as Coin or Bar, unless you want to wear and flaunt your jewellery.
I enclose the article about the scheme, which the government is likely to launch soon.
MMTC PAMP India is a joint venture between MMTC (a government of India undertaking) and PAMP Switzeland (a bullion brand), a privately-owned precious metals processing facility.
Giving an example, Khosla said, “If one deposits 35 gm of gold, he can get back 36.5 gm on maturity.“
Banks can lend this gold to jewellers or deposit it with the Reserve Bank of India, that will free rupee liquidity which in turn will have an impact on the earnings, Khosla said.
The idea behind the scheme is to liquidate a portion of the estimated 25,000 tonne of gold lying idle in the Indian households and increase the availability of the yellow metal in the market.The gold account will help mitigate the fear of a ballooning current account deficit owing to high gold imports.
The bullion industry has already made a presentation on the scheme to leading banks in the country. “We are waiting for their response. Based on their feedback, we will fine tune the scheme further. If all goes well, we are hopeful to launch the scheme during the first quarter of 2015. It all depends on the intention of the stakeholders that include refiners, jewellers and bullion dealers,“ Khosla said.
According to the scheme, a gold account holder can place as little as 20 gm of gold with the bank. The sche-me is expected to address more than 90% of gold consumers in India, who do not possess more than 500 gm of gold.
Bullion industry executives said RBI is convinced that this is the way forward, although its contention has always been the consumer guarantee on the purity of gold. This is where MMTC-PAMP can come to help as it has India’s first accredited refinery with a capacity of 150 tonne. There are around 250 approved hallmarking units in India. MMTC-PAMP India is also developing an advanced software for the scheme, which is expected to be ready by October.