Form the time i had shown interest in gold April 2010 gold has been up almost 50% in a span of 1.5 years. This should be historical bull run for the precious metal in all history.Last article's aim was to show that gold gave better returns compared to inflation on a consistant basis. But a return of 50% in this period is by no means normal.Such a sudden spike has driven lot of people to consider gold of investment recently ( retail investers tend to enter at the tail end of any bull run). Widely used method for investing in gold are as follows
- Traditional method of buying jewellery
- Buying gold coins ( from banks , dept of Post)
- Gold ETF
Jewellery
From investment point of view this is the worst method .
Pros:
- Can feel the aesthetic value of gold.
- 5-25% more to paid for making charges etc depending on the intricacy of design.
- No universal rules ( most of charge charge cost of gold for stones weight too )
- During small value purchases, consumers don't have negotiating abilities
- should take of safe keeping
- vat/sales tax should be paid over cost of jewellery
- Wealth tax ( 1% for assets more than 30 Lakhs)
- When we try to sell back returns from jewellery , we will take a hit of 5-25%
Gold coins
Pros:
- 24 Carat, 999.9 pure. Imported from switzerland (why the hell does it matter ? )
- Distributed by banks , Dept of Post which can easily relied than Jewelleries
- Tamper proof packing
- Atleast 10% premium ( due cost of distribution )
- Price are not uniform . Vary highly between banks (see the table below)
- Should take of safe keeping
- Price of lower denominations are very costly (some cases extra 10% costlier)
- 1% VAT/Sales Tax over the cost of coin
- Subject to Wealth Tax ( 1% for assets more than 30 Lakhs)
- Banks don’t buy back the coins.So you have sell back to jewellers
- When we try to sell back returns from jewellery , we will take a hit on the 10% premium paid.
ETF
Exchange traded funds from mutual fund house
PROS
- Assured purity of 99.5%
- No premium charges ( As there is no cost for distribution as it uses the existing stock market framework )
- No VAT / Sales Tax / Securities Transaction Tax
- No Wealth Tax
- Cant physically feel the gold
- Easy to realize investment returns
- Volumes are low
Price of Jewellery
22 Ct | 24 Ct | |
Dinamalar | 2637 | 2820 |
Prince Jewellery | 2640 | 2824 |
Price of Gold coins at various banks
BankName | Lowest Denomination | Highest Denomination | Price per gram | Tax |
SBI | 6235(2gms) | 150350(50gms) | 3118 - 3007 | exclusive of Value Added Tax/Sales tax. |
IOB | 6141(2 gms) | 292774(100gms) | 3071 - 2928 | exclusive of Value Added Tax/Sales tax. |
HDFC | 8520 (2.5 g) | 330620(100g) | 3400 - 3306 | including sales tax as applicable in Mumbai |
Corp Bank | 6221 (2 g) | 289254(100g) | 3111 - 2893 | exclusive of Value Added Tax/Sales tax. |
ICICI | 3514 (1g) | 60564 (20g) | 3514 - 3028 | exclusive of Value Added Tax/Sales tax. |
BOI | 12138(4 g) | 146882(50g) | 3034 - 2937 | exclusive of Value Added Tax/Sales tax. |
NAV of Various ETF
ETF Name
|
Price
|
Volume ( in Lakh Rs)
|
Goldman Sachs Gold ETF
|
2685
|
3386
|
kotak
|
2697
|
670.34
|
Reliance Gold ETF
|
2601
|
446.65
|
SBI Gold ETF
|
2733
|
217.44
|
HDFC Gold ETF
|
2745
|
174.52
|
UTI Gold
|
2668
|
121.43
|
Religare gold etf
|
2761
|
49.42
|
ICICI Prudential Gold ETF
|
2745
|
23.8
|
Conclusion :
Based on the pros and cons listed above the best option for investing in gold is through Gold ETF.
Based on the pros and cons listed above the best option for investing in gold is through Gold ETF.
Capital Gains Tax:
ReplyDeleteIn case of physical gold and e-gold , the long-term capital gains tax becomes applicable only when the holding period exceeds 3 years. This limit is just 1 year in case of Gold ETFs.
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