This Festive Season, Invest in Hassle Free Gold

Despite government measures to curb demand, consumer demand for Gold was at a staggering 310 tonne! Up by almost 71% as compared to last year.

Regardless of the market conditions, Gold as an investment option has always found favour in our country which looks at Gold as an easy route to get liquid cash. But, of late, many investors are increasingly experiencing the downsides of investing in physical gold like storage problems, fear of theft, less resale value and impurity concerns.

Does this mean that Gold no longer remains as the top investment choice of Indian households?

The answer is no! With the introduction of Gold ETFs you can now enjoy all the investment benefits of Gold without having to worry about the hassles of dealing with physical gold!

So What Are ETFs or Exchange Traded Funds?

ETF's acts as securities that track an index, a commodity or a basket of assets like an index fund, but trade like stocks on exchanges.

Just like stocks, ETFs too experience price changes throughout the day as they are bought and sold. These ETFs, when linked to Gold prices in the markets, are called Gold ETFs or GETFs. These Gold ETFs can be bought & solde just like you would buy or sell the stock of any company from your broker.

These ETFs are passively managed funds and they simply follow the price of gold in the market. Therefore their returns match the returns of gold you would buy off-line. Needless to say, they are extremely easy to buy since you can even buy just one unit (which corresponds to one gram of physical gold) at a time. Over time, you can build up your gold portfolio to the level you want, just as you would with your bank or jeweller, only this is easier to buy and retain as well. What's more as the investors needs change, he can easily sell them on the exchange as well!

Why You Should Invest in Gold ETFs?

Investing in gold ETFs is extremely beneficial and give you several benefits like:

Liquidity: Gold ETF units are freely traded on stock exchanges during market hours.

Pricing: There is transparency in pricing of a Gold ETF as it is linked to price of 1 gram of gold. With ETFs you also get the benefit of zero premiums and making charges. Although you do have to pay brokerage for trading in them.

Affordability: You can buy as low as 1 gram of gold. Procuring physical gold of the same quantity is extremely difficult. Transaction charges are generally lower than in equities and there are no entry-exit load charges levied by the funds!

Quality Assurance: If you are buying physical gold, your first concern would be to be sure about the quality of gold. Since ETFs buy only from the most reliable sellers, the quality of gold will not be a cause of concern. LBMA, 23.88 carat.

Wealth Tax: On physical gold you need to pay wealth tax. But there is no wealth tax on Gold ETF investments. AS per the current policies or scenario in the markets (Add points from the Table)

Safety: You don't have to worry about the safekeeping of the gold when you invest in Gold ETF. The headache of dealing with the security of the physical gold lies with the custodians. And for investors, they are held in demat form. The gold backing the ETFs are also fully insured.

Collaterals: What's more? You can use some of the available Gold ETFs for margin trading as well!

ETFs You Should Consider For Investments

Fund	Min Inv	AAUM (Rs. in Lac)	NAV (Oct 29, 2013)	3-Year Return	5-Year Return
Goldman Sachs Gold BeES	10000	2828.12	2,782.23	13.26%	13.85%
Kotak Gold ETF	5,000	1,10,578	2,770.57	13.45	18.13
UTI Gold ETF	20,000	66,192	2,388.83	13.49	18.18
SBI Gold ETS	5,000	1,38,090	2,440.66	13.61	NA
Religare Invesco Gold ETF	5,000	7,253	2,469.89	13.6	NA

Note: Returns are calculated on compounded annualised basis for a period of more than a year & absolute basis for a period of less than or equal a year.

Edelweiss' Research View on Gold While, the corrections in April and June of this year have worried some short term investors. Although it is possible that in the short term we see consolidation phase, our long term fundamental outlook remains unchanged! We think that this scenario is the most likely for the coming months and years. Governments can''t and wont tackle any real problems, they will follow their muddle through policy as they have done so far. Measures of financial repression like the capital controls and the confiscation taken place in Cyprus are likely to increase. As in recent years the current policies of governments positively impact gold prices. We think that the current “correction” is only a temporary phase in the long term upward trend. We continue to be bullish on gold, supported by its fundamentals that remain intact. We highlight gold’s high marketability and liquidity – it a worldwide accepted currency and medium of exchange, with abundant demand.  But most importantly, we highlight the great plus factor of gold lies in the lack of credit or counterparty risk. We continue to find gold to be an important hedging instrument, not only against inflation, but also against possible currency debasement, and possibility of economic fluctuations and increased measures of financial repression introduced by western governments. Easy Monetary policy, stimulus, and Debt Ceiling issues in US will continue to give safe-haven appeal in Gold for next few months. There's been continued debasement of currencies, which has been a driver all along. There's talk of cutting back on quantitative easing, yet the government continues to print aggressive amounts of money. During the recent downturn in the gold price, there was significant buying from places like Asia. The Chinese and Indians continue to buy gold when the price comes off,  Price Outlook Internationally, Gold is not expected to breach its April months lows and sustain below $1200, because All-in-cost of production for majority of Gold producers is around that level. So this means, if correction comes, price downside is limited to only 4-5%. On the other hand, if prices sustain above $1400, a renewed buying would take the prices to $1500 and more. At Domestic browses, due to rupee depreciation, Gold touched Rs 35000/10 gm in August. But now USDINR has stabilized around 62 levels, prices have retraced to Rs 30000/10 gm. For last quarter of 2013 ( or next three months), prices are expected to trade in range of Rs 28000/10 gm to 32000/10 gm, so any dip should be used as buying opportunity. The best strategy would be investing in Gold through SIP and averaging the buying prices on lower levels.

So, what are you waiting for? Invest in Gold ETF now!!!