Posted On Monday, Apr 04, 2016
"The desire for gold is the most universal and deeply rooted commercial instinct of the human race." - Gerald M. Loeb
What Mr. Gerald M. Loeb has penned is especially true for Indians. India`s love for gold is as ancient as its culture. It`s precious and worthy across all times. For Indians, gold jewelry is wearable wealth, financial security that`s also a fashion statement. Gold in the form of jewelry is given as gifts during weddings, festivals and other special occasions. It is still the preferred form of purchase as against the paper gold (ETFs) which has ironically more pros on its side. Nevertheless, the recent jewelers strike has made it difficult for investors to liquidate (buy or sell) gold.
The Gold and Jewelry establishments in many parts of the country remain closed since March 2nd, 2016 as traders protest against the budgetary proposal to impose 1% excise duty on non-silver jewelry. Moreover while it could look like they are apparently seeking rollback of the 1% excise duty that Finance Minister Arun Jaitley proposed to levy on gold and jewelry sales in Budget 2016-17; it is not just the additional excise duty that is the main concern to the jewelers, but they are worried of the “inspector raj” and the inconvenience that it will cause. The pestering that jewelers face from the excise department and the maintenance of books of records and the excise complexity relating to valuation, etc. are open to interpretation are some of the reasons behind the strike cite the jewelers community.
What happens during such times is that the “golden habit” of buying gold or even investing in gold suffers. As the wedding season has arrived in India gold jewelry purchase is one of the biggest factors that got affected by this strike. It has been seen that would-be-brides are disappointed for not been able to buy gold jewelry for their D-day. Moreover, the investment in physical gold through monthly SIP has come to a stand-still as people can’t pay-off their monthly installments. One of my dear friends Mr. Kulkarni is worried that the jeweler his family has always bought gold from has shut his showroom’s door for a while now and his monthly gold SIP that he has planned for his daughter’s wedding would take a hit. Moreover, he is worried as he is unsure whether his monthly installment would be debited towards his gold purchase.
In India, people store gold as a contingency resource, which can be liquidated anytime, easily. However due to the current strike investors could have a tough time liquidating their gold for any emergency as shops are shut.
Moreover investors need not get bogged down by such strikes rather should opt for more evolved efficient options that are available for investors when buying gold – Gold ETFs. Its often said that big changes happen only during a crisis. We hope that this crisis in form of jewelers strike also evolves a changed behavior where gold buyers would opt for better efficient ways of buying gold the next time they look at buying gold. Gold ETF and Gold Saving Funds are the smarter way to invest in gold. Apart from being price efficient, they are convenient and safe. While the gold is of a purest quality in case of ETFs, the BIS (Bureau of Indian Standard) survey has revealed it in the past that there is some purity issues with the gold that we buy in physical form especially in jewelry. The expenses of a Gold ETFs are very small as compared to the mark-ups and making charges that are charged by the jewelers.
More importantly ETFs are unaffected by such strikes and are well regulated by SEBI.
As a Fund Manager for gold fund I believe investment in this asset class is a good diversification for any investor’s investment portfolio and thereby helping them to reduce overall portfolio risk in the turbulent financial times that we live in. Therefore rather than going out, selecting a trusted jeweler and finding the purest form of gold is a task in itself. It is always better to invest in gold – (ETFs) where every unit is backed by physical gold making it as good as gold and gives investors the luxury to buy gold in just a few clicks without worrying about the quality aspect of it. Through the lower cost of operations and the availability of units having smaller denominations, gold ETFs would provide investors an excellent means of asset allocation.
A gold ETF seeks to offer investors it’s units issued only in dematerialized form through depositories. To avail the same investors should have a Demat/beneficiary account with a DP. However, investors who do not have a demat account but wish to invest in gold through mutual funds can invest through gold saving funds. These funds have an added benefit, which offers investors with a simple way to regularly invest in gold through Systematic Investment Plans. Gold saving funds give convenience through SIP facility. It also gives opportunity to buy gold in small amount, as against physical gold. Investors can start their investment in gold savings fund with as less as Rs. 500/- .
In an unsettled environment where investors are facing troubles to invest in gold, its time they introduce themselves to a smarter way of investing in gold through mutual funds. Moreover investors could also consult a financial advisor before taking any investment related decision.
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The views expressed here in this article are for general information and reading purpose only. The views expressed here do not constitute any guidelines or recommendation on any course of action to be followed by the reader. The views are based on the publicly available information, internally developed data and other sources believed to be reliable. The views are meant for general reading purpose only and are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the readers. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and opinions given fair and reasonable. Recipients of this information should rely on information/data arising out of their own investigations. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investments. None of The Sponsor, The Investment Manager, The Trustee, their respective directors, employees, affiliates or representatives shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in this document.
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Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.