Gold As An Investment

Gold is the oldest precious metal known to man and for thousands of years it has been valued as a global currency, a commodity, as investment and simply an object of beauty.

Why Gold
Gold is unique as it is both a commodity and a monetary asset.

Its stability and high value makes it virtually indestructible and ensures that it is almost always recovered and recycled. There is no true consumption of gold in the economic sense as the stock of gold remains essentially constant while ownership shifts from one party to another. Although gold mine production is relatively inelastic, recycled gold (or scarp) ensures there is a potential source of easily traded supply when needed, ad this helps to stabilize gold price. Economic forces that determine the price of gold are different from, and in many cases opposed to the forces that influence most financial assets.

How To Invest Gold?

Gold ETF
E Gold Gold Mutual Fund

Gold ETF
Gold ETFs or Gold Exchange Traded Funds have been touted as the best replacement for physical gold. In fact, Gold and ETFs have outperformed benchmark stock indices in the last few years, making them an attractive investment proposition. Gold ETFs are open ended mutual funds whose units represent physical gold with 99.5 per cent purity. Each unit represents 1 gram of gold. These units are traded on the stock exchanges though the volumes could be low at times.

Advantages
Gold ETFs track gold and can be accumulated in small amounts for future needs including retirement, marriage etc. Gold ETFs also offer fairly good liquidity and can be easily sold. Interestingly, unlike physical gold that do not attract VAT, service tax etc. Also, unlike physical gold where long term capital gains would apply only after three years, in the case of gold ETFs long term capital gains would apply after a period of one year. Interestingly, it may be noted that physical gold attracts wealth tax, whereas there is no wealth tax payable on gold ETFs.

Disadvantages
Gold ETFs may be slightly more expensive than physical gold because of the management fees charged by the respective fund house. Also, one has to incur brokerage which could increase the price of a unit of the ETF. In any case gold ETFs are gaining popularity as the government plans to discourage the import of physical Sgold as it continues to put pressure in the current account deficit. Over a period of time Gold ETFs are Slikely to become extremely popular.

E-Gold
Who should use e-gold Any business or individual who wants to make or receive convenient, secure, cost effective, and final payments across the internet. Whether your market is: * On-line retail trade or services * International remittances * Micro-payments, such as music downloads * Paid content websites * Internet gaming * On-line auctions

Advantages
The market for goods and services sold across the Internet is large and growing. Receiving or making payment, however, can be a problem. e-gold solves the problem. 100% backed by gold bullion e-gold is truly global, minimizes exchange risk, and meets the demands of Internet payments: * Immediate settlement worldwide, 24/7 * Finality of payment, no chargebacks. * Payments are bi-directional allowing interactive service payment * The system is robust, efficient, and secure * Merchant interfaces are easy to implement * Transaction costs are low

Disadvantages
There is also a pressing issue regarding the technology involved in digital cash. Power failures, loss of records and undependable software often cause a major setback in promoting the technology.

Privacy questions have also been raised; there is a fear that the use of debit cards and the like will lead to the creation by the banking industry of a global tracking system. Some people are working on anonymous ecash to try to address this issue.

Schemas
Gold Benchmark Exchange Traded Scheme (Gold Bees)

% Returns

26.45

UTI Gold Exchange Traded Fund

Kotak Gold ETF Quantum Gold Fund Reliance Gold Exchange Traded Fund SBI Gold Exchange Traded Scheme

26.12
26.05 26.01 26.01 25.13

Comparison
Feature Traded on a stock exchange Mutual Fund MFs are not traded on stock exchanges and you have to buy them directly from the fund house. MFs can only be bought and sold at their NAV ETF ETFs are traded on stock exchanges and you can buy and sell them on the exchange. ETFs have NAVs and all ETFs show their real time NAVs on their websites. However, since they are listed, you can buy them on the quoted price. Since ETFs trade on the market, you need a trading account to transact in them. Expense ratios of ETFs tend to be lower since they are passive in nature.

NAV or Quoted Price

Trading account needed

You dont need a share trading account to buy a mutual fund. Expense ratios on mutual funds are generally higher, especially because a lot of them are actively managed. Since you buy mutual funds directly from the fund house you dont have to pay any brokerage on it.

Expense Ratio

Brokerage

You will have to pay the brokerage on ETF transactions since

Conclusion