Cash In On Gold

If there is a traded commodity that one can brag about in today’s uncertain market – where the prices have moved up substantially and given excellent returns, it has to be gold. While there was blood on the streets across the world from Wall Street to Dalal Street, gold was shining bright, bringing cheers to those who possessed it. Gold has touched a record high of Rs 16,000 per ten grammes and is expected to go up further on account of the ensuing festival season. And if you haven’t joined the race as yet, you may still be missing out on some capital appreciation.

A good hedge

Historically, gold as a commodity has been used for hedging inflationary risk. Now assume you had bought gold from the bank three years ago and at the same time invested an equal amount in the equity markets. As of today, the three-year returns from your investment in gold would have been 90 per cent as against the Sensex which grew by just 32 per cent. If we analyze returns given by the Sensex and gold since January 2008 to Sept 14, 2009, the benchmark index has disappointed investors with a negative return of 8 per cent whereas return on gold have been an impressive 63 per cent.

Utilising idle gold

Many people have resorted to acquiring gold assets due to the turmoil in the equity markets and this trend has been spotted by banks which have now started campaigning aggressively for their gold deposit schemes (GDS). The RBI had nominated certain banks for GDS in order to mobilize the privately held stock of gold in the country and put it into productive use. The idea was to provide depositors the opportunity to earn interest on their idle gold holdings along with the benefits of safety and security of holding gold without any cost. In recent times it provided people with excellent opportunities for people looking to hold on to their gold deposits for some time.

What do gold deposits offer

Gold deposits offer a host of benefits to the investors, including safety and security without any additional cost, interest on idle gold, access to loans in case of exigencies against gold deposit certificates from the banks and tax benefits in terms of income tax, wealth tax and capital gain tax. The best part is that the minimum quantity required to deposit is 500 gms, without any upper limit.
[PAGE BREAK]

The interest rates on gold deposits depend on the tenure of deposit and usually varies from 1 to 2 per cent for an average tenure ranging from 3 to 5 years, respectively. These rates remain unchanged post-deposit, but the banks can change the interest rates for fresh deposits. What one needs to understand is that apart from the appreciation in value of the asset the investor will also enjoy interest on the gold deposited which is an additional benefit. Hence, considering the benefits offered by the gold deposit scheme, it is a wise decision to make the most of your gold by depositing it with the bank.

Gold Coins

Many of the banks today also offer gold coins for sale to their customers. Gold coins are presently sold through select branches of major banks across the country. Price of gold coin is based on day-to-day market price of gold. These gold coins round-shaped and are available in weights of 2 gms, 4 gms, 5 gms, 8 gms and 10 gms. However, 20 and 50 gms gold is also sold in the form of ingot (rectangle shape) at select branches. The coins and ingots have 999.9 purity with assay certification signifying the highest level of purity and come with tamperproof packaging.

Easy availability

Gold coins are easily available across the counters in designated banks. Banks offering gold coins include State Bank of India, Indian Overseas Bank, Punjab national Bank, etc. No documents are required for the purchase of gold coins from the banks with value less than Rs 50,000. However, for purchase of gold coins above Rs 50,000, you may be required to submit a copy of your PAN card to the bank.

Best bet

Considering that gold as an investment has given handsome returns over a period of time, buying gold coins from banks is always a safe bet. Besides, since gold coins can be sold almost at the market price, it assures fair degree of liquidity without any loss on account of making charges. Also, gold coins can be given as gift to near and dear ones. Above all, gold is a low risk product and is one of the alternative instruments of saving, hence buying gold coin is investing in one of the safest and most rewarding among all asset classes.