GOLD

GOLD

1. Types of Gold to buy:

            Sovereign Gold Bond

            Gold ETF (Goldbees)

            Gold Mutual fund

            Gold Futures and Options (Only for advanced traders)

2. Gold does not beat inflation. Only Equity and Real Estate can beat inflation

3. Gold should be 5-10% to total Asset of investment

4. The average returns of gold is 6-8%

5. It is advisable to prefer buying gold during

            War.

            Hypervalued Share market

6. You can hold unlimited quantity of gold if you have proof of sources. e.g. Income disclosed in past and bought gold. Gift deed of inherited gold.

7. If you can’t explain the source of gold then, there is upper limit.

            500 gm – Married woman

            100 gm – Man

            You can hold 600 gm gold without fear. .

            But, If its more than 600 gm then you must dispose it or get paperwork to explain as inherited property.

            If we want to hold gold >600gm , we need to furnish details of Income earned – Tax paid- Gold bought by post Tax income (receipts)

8. SIP is better to any volatile asset for cost averaging. Hence, SIP of gold ETF is better .

            Our ancestors were smart to start SIP in gold. Muhurat for gold buying,its nothing but SIP

9. Get a GIFT deed from some senior relative who is alive for inherited gold.

            If you have difficulty then dump gold and get cash.

10. Although, gold doesn’t beat inflation in long term, its return is inverse to share market. Hence, it’s important for diversification. Gold is also needed in uncertain economic conditions.

11. Capital gain tax is calculated when old ancestral gold is sold:

            Base year for indexation is 2001.

            Your buying price will be considered as market price in 2001.

            Capital gain tax is 20% with indexation

            10% without indexation

12. The best way of disposing gold is selling to a jeweller

13. Ancestral Gold be sold & invested in residential property to save LTCG under section 54 F of income tax

14. Unlimited gold can be gifted by father to daughter

15. Gift as gold received at marriage is nontaxable. You can ask CA to add to BL sheet and better to have gift deed for the same

 

Paper Gold

INTRODUCTION:

There are FOUR (4) ways to invest in paper gold.

[1] Exchange Traded Funds:

            Sovereign Gold bonds (SGB): You can buy/sell SGB in secondary market at stock exchange. You get 2.5% annual return also.

            Exchange traded Gold funds:  You can buy/Sell gold ETF on stock exchange. E.g. GOLDBEES.

Please note: Sometimes Liquidity may be an issue at stock exchange

[2] GOLD MUTUAL FUND

You can buy mutual funds from directly fund houses also.  It’s similar to Equity mutual fund except that gold fund invest in GOLD.

[3] SOVEREIGN GOLD BOND– You can buy SGB from government vis banks during offer period. You would get 2.5% annual interest

[4] MCX commodity exchange.

Traders can buy GOLD FUTURE on MCX or NSE exchange.

However, if you want to invest for long term (say 5 years) , then you need to ROLL OVER futures frequently. Rollover has some friction cost.

However,  patient traders can make SIGNIFICANT amount of money in GOLD future if he knows the technique.

LESSONS LEARNT:

1. Choosing between Gold MFs and ETFs:It’s just matter of convenience. Not significant difference in return

2. The easiest and most beneficial for buying Gold is:

            No 1 : SGB at issue

            No 2 : Gold ETF

            No 3: Gold Mutual fund.

3. Gold Future is for Experts.  its most beneficial but most difficult

4. Gold is commodity.  Value is depend upon purely demand and Supply. No fundamentals are useful for commodity

5. We should do DIP buy and SIP both for paper gold

6. When you sell paper gold you get Cash in bank account. Thereafter You can buy physical gold

7. Auto Renew is not possible on completion of bond for SGB

8. The average returns on paper gold is 6-8%

9. If you use less leverage means buy 20 Lacs Gold in 5 lacs, and roll over position then you may get CAGR more than 20% in 7-8 years10. Commodity account is a must for gold trading