Investing in Gold?

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Bullion - Wil it come back in demand?
The Equity Desk Forum :Economy, Markets and commodities :Commodities - Gurus call it the best hedge in current times :Bullion - Wil it come back in demand?

Topic: Investing in Gold?

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manishdave
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Posted: 23/Oct/2010 at 12:54pm

There is utility of gold as investment/money. No doubt about that.

One real life example. Last year RBI purchased 200 tonnes of gold. Can they buy farm land? Can they value it easily? Even if they buy one large track, can they farm it? Can they sell when they want? Can they buy equities? Or hold dollars which is debasing faster than rate of interest and that is not going to change anytime soon.

Gold may be bubble or may not be bubble. I don't know. But current debt situation in developed countries like US/EU/JAPAN is unique. And some investors or some part of their investment is trying to hold asset that is easy to buy/sell/value/store and will keep purchasing power. So that way it IS productive.

One risk for gold is higher interest rate. But with so much debt if rate goes up many developed countries will not be able to service debt. It is similar to what happened when mortgage rate re-adjusted, only scale is much larger.

Edited by manishdave - 23/Oct/2010 at 12:54pm

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rajnsharma
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Posted: 23/Oct/2010 at 1:36am

Originally posted by manishdave

There is utility of gold as investment/money. No doubt about that.

One real life example. Last year RBI purchased 200 tonnes of gold. Can they buy farm land? Can they value it easily? Even if they buy one large track, can they farm it? Can they sell when they want? Can they buy equities? Or hold dollars which is debasing faster than rate of interest and that is not going to change anytime soon.

I am not sure comparing RBI with an individual will be a right comparison. These are more of a risk mitigation strategy for institutions and HNIs. They can go and sell gold as well when they feel they need to to. How many times an individual would sell gold? It has more a sentimental value than anything real for an individual.

For ordinary investor it's a dead investment as they are in form of Jewelery which will not be sold ever. I would consider anything as an investment when it is bought with an intent to make profit. And I feel for most of us it is not an investment as Jewelery fails to fulfill this criteria. The same is true with the house where you live in.

I buy gold every year for my wife but don't consider it as investment as is not the one which I will sell ever.

The above is my personal opinion which guides my investments. Mankind have always lived in uncertain times as there are always some worries around us.

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paragdesai
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Posted: 23/Oct/2010 at 7:09am

Gold investment is more like insurance today against insanity (read debasement of their respective currencies) of Government world over.

Rising Gold price in nothing but diminishing confidence of people in Government world over specially in US.

Luck is what happens when preparation meets opportunity ....

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Monkey
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Posted: 23/Oct/2010 at 11:37am

Irrespective of what Buffett says, according to my understanding, over a very long term, value of Gold rises in line with inflation, more or less. I read somewhere that amount of Gold required for buying a business suit 100 years back is the same as of today. It seems that cost of a basket of basic essential goods remain more or less same in terms of Gold for a long period of time. Therefore, Gold price tends to increase when interest rates are less than inflation and vice-versa. I posted a chart in some other thread which I am posting below which indicates this relationship.

Inflation adjusting qualities of Gold is what made it money over a period of thousands of year and it remains true today as far as basic goods are concerned. However, in those periods, economies were dependent on Agriculture and later on industrial production which was commodity heavy. I am not so sure whether Gold can hold its purchasing power for today’s services. I mean I have not seen any study to check whether amount of Gold that can pay for, say a medical procedure, remains same over long period of time.

So, I am treating Gold just like any other asset class. There are times when it is good to hold Gold and there are times when it is not.

By the way, this reasoning does not apply to any decisions for buying my wife’s jewelry!!

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KUNJ
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Posted: 24/Oct/2010 at 1:16pm

I think Gold ETFs are best

Edited by KUNJ - 24/Oct/2010 at 1:21pm

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THEINVESTOR
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Joined: 23/Oct/2010
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Posted: 24/Oct/2010 at 1:23pm

Hii Aditya,

I think the choice of your mode of investment depends upon your intent behind purchasing gold.

1. For investment purposes - Gold exchange traded funds. There are plenty in market. Howeever I prefer Benchmark Gold ETF & UTI Goldshare ETF. A unit of an ETF fund approximates the value of 1 gram of gold. So, you can invest in small amount. Gold ETFs edge over physical gold in several aspects- one can save you the cost of storage of gold bar, no need to worry about the accuracy of weight or purity of the gold, no wealth tax liability.

2. For Marriage/ other Functions : No alternate but to buy physical gold from reputed retailers like Tanishk.
Buying from banks not advisable as they they cannot buyback from customers.

Hope it clarifies

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FutureBull
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Joined: 06/Feb/2009
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Posted: 13/Jul/2011 at 11:20pm

Gold making move towards all time high

‘The market always does what it’s supposed to — BUT NEVER WHEN’.

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stock_surgeon
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Joined: 24/Mar/2010
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Posted: 13/Jul/2011 at 11:38pm

...

Edited by stock_surgeon - 13/Jul/2011 at 11:48pm

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