As I read back the history of Gold it has always rewarded people with thick returns in Longer horizon. Yes there were macroeconomic situations when shine of Yellow Metal faded but no one could keep the shine away from it for long. Its Consistent performance has build immense faith in investor’s mind and that is the reason that Demand of Gold will continue to grow and so as the prices.
The recent example of robust performance by Gold is ,2008 Financial Meltdown worldwide. Gold was the only Investment which continued to rise (barring Crude Oil) against all graphs going down south. Gold was INR 4,000 per 10G in 2001 and 10 years later it has reached INR 20,000 per 10G in Jan 2011, the absolute return of 400%, isn’t a thick return ? Don’t forget that there was Global Financial meltdown in 2008, 2009 and early 2010 in many parts of world as a result Sensex was down from 21,200 points (Jan 2008) to 8,000 Points (March 2009), which is 63% reduction and mind it, the same was the story of investors who had nothing in their portfolio other than equity.
Like other commodities, Gold’s prices are primarily determined by Demand and Supply but not to forget that no commodity is away from Speculation. Gold Demand and Supply really gives interesting insights on how India has large share in Gold Demand.
As per World Gold Council, 5 Year Average (Q4 2005 to Q3 2010) of Demand is 3,766 tonne out of which 57% (2,151 tonne) is of Jewellery and 31% (1,182 tonne) is for Investment purpose. Interestingly India and Middle East account for 70% of world Demand. Further, Above the Ground stock of Gold as on 2009 end was 165,600 tonnes with more than 50% share of Jewellery and merely 18% as Investment.
How to Invest in Gold ?
There are numerous ways to get an exposure into Yellow Metal Investment.
- Coins and Bars – An easy way to make investment in Gold is buy physical Gold in the form of Coins or bars. Normally Coins are available in Grams in India and wide range is offered by the industry.
- Exchange Traded Funds – The best way to make investment in Gold. No need to take physical delivery and keep Gold in safe. There are many ETFs in India in the form of Mutual Funds which are linked with Gold price performance in market. In some of the cases there are requirements for AMCs to keep physical Gold with them.
- Futures and Options – Since Gold is a commodity, it is traded at Commodity Exchanges. As a result Future and Options can be a best way for investment in Gold.
Apart from these three ways there are lot of other options but in India practically these three practices which are popular among investors. ETF investment in Gold is similar to other Mutual Fund products hence is the best way to add shine of Yellow Metal to your portfolio.
Almost every broker or so called expert of Stock market comment on Gold performance and some of them have gone to the extent of predicting Gold prices by 2020 equivalent to USD 3,000 per Ounce (28.3G). Now what really happens is a matter of time, folks watch it once you add shining metal to your portfolio and enjoy the Giant Swing which is surely going to be upward.
Do not mix Taxation when it comes to Gold. There are some tax implications but do not let them dominate your investment decisions in this case because there is no other investment script which would give you returns like Gold and also save tax to you.
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