Did you Buy Gold this Dhanteras?
The festival of Dhanteras falls in the month of Kartik (Oct-Nov) on the thirteenth day of the dark fortnight. This auspicious day is celebrated two days before the festival of lights, Diwali.
Dhanteras is spent in worshipping Lord Yama – the god of death – to provide prosperity and well being. It is also the day for celebrating wealth, as the word ‘Dhan’ literally means wealth and ‘Tera’ comes from the date 13th. People flock to the jewelers and buy gold or silver jewelry or utensils to venerate the occasion of Dhanteras.
Legend behind the Festival:
An ancient legend ascribes the occasion to an interesting story about the 16 year old son of King Hima. His horoscope predicted his death by snake-bite on the fourth day of his marriage. On that particular day, his newly-wed wife did not allow him to sleep. She laid out all her ornaments and lots of gold and silver coins in a heap at the entrance of the sleeping chamber and lit lamps all over the place. Then she narrated stories and sang songs to keep her husband from falling asleep.
When Yama, the god of Death, arrived at the prince’s doorstep in the guise of a Serpent, his eyes were dazzled and blinded by the brilliance of the lamps and the jewelry. Yam could not enter the Prince's chamber, so he climbed on top of the heap of gold coins and sat there the entire night listening to the stories and songs. In the morning, he silently went away.
Thus, the young prince was saved from the clutches of death by the cleverness of his new bride, and the day came to be celebrated as Dhanteras. It is also know as ‘Yamadeepdaan’ as the ladies of the house light earthen lamps or ‘deep’ and these are kept burning throughout the night glorifying Yama, the god of Death.
The Myth of Dhanavantri:
Another legend says, in the cosmic battle between the gods and the demons when both churned the ocean for ‘amrit’ or divine nectar, Dhanavantri – the physician of the gods and an incarnation of Vishnu – emerged carrying a pot of the elixir. So, according to this mythological tale, the word Dhanteras comes from the name Dhanavantri, the divine doctor.
Significance of Dhanteras:
Dhanteras is famous as festival of shopping. On the occasion Dhanteras people buy Utensils, Gold or Silver coins, trendy jewelry, God’s Idol, Pooja Thali and Dhanteras Sweets. Several people purchase Gold or Silver coins containing emblems of Lakshmi, Ganesh, Om or Swastik.
This Dhanteras, think different and make an auspicious beginning!
Gold comprises the bulk of India's total imports with close to 900 to 950 tonnes of gold imported every year. It is estimated that close to 23,000 tonnes of gold is lying in Indian household. If the ideal gold is deposited with banks, it will enable banks to lend it to jewellers, thereby reducing demand to import gold.
After giving negative returns in the previous three calendar years (2013-2015), gold has rallied around 20 per cent in the Indian market year-to-date. Having run up so much, there is a question mark on whether the yellow metal can repeat its stellar performance in the near term. The possibility of one Fed rate hike this year, and a couple more in 2017, also casts doubt on the yellow metal's prospects in the short term.
Dhanteras, which is celebrated today on 28th October 2016, is associated with buying gold to usher in wealth and prosperity. Over the past few years gold has metamorphosed from a glittering piece of jewellery to a valuable investment option. Even if you are a stickler for tradition, don’t just add to the gold rush by buying jewellery. There are better and more cost efficient ways to invest in Gold such as Sovereign Gold Bond (SGB) or Gold ETF (Exchange Traded Fund).
What you need is just a demat account to buy units of Sovereign Gold Bond and Gold ETF. Most of you already have a demat account to buy / sell stocks. The same can be used to buy Sovereign Gold Bond and Gold ETF.
Few benefits of SGB & Gold ETF over conventional buying of Gold coins / jewellery are as under:
i) There is no storage cost. The SGB / ETF is kept in your demat account.
ii) No risk of impurities. At the same time, you don’t have to pay a premium for buying superior quality gold.
iii) You have the flexibility of buying gold in smaller lots through a DIYSIP (DO IT Yourself Systematic Investment Plan) in case of Gold ETF
iv) You can easily sell ETFs unlike physical gold, which is often bought back at a discounted rate. In case of Gold ETFs, you get money close to the spot price of gold.
v) Physical gold and e-gold attracts wealth tax. No wealth tax applicable on Gold ETFs in India.
Advantage of Sovereign Gold Bond (SGB) over Gold ETF
How do SGBs compare to ETFs? One area where the SGBs score over gold ETFs is the sovereign guarantee. The government guarantee is applicable both on the redemption amount and on the interest.
Gold ETFs are offered by private sector AMCs and do not have that kind of advantage. But do note that the sovereign guarantee here does not shield investors' capital from volatile gold prices. Both the value of your SGB and the value of your ETF swing up and down with market prices of gold during your holding period.
Secondly, SGBs pay you an assured interest over and above the price returns on gold. Gold ETFs do not give you that comfort and rely only on price returns. Gold bonds offer 2.75% per annum (paid half-yearly) on the initial investment. Thus, investors earn returns linked to the gold price (just like in gold ETFs) plus a fixed annual interest income. The tenure of gold bonds is 8 years but exit options are available in the 5th, 6th and 7th year.
Unlike gold exchange-traded funds (ETFs), the bonds will not be backed by gold but a sovereign guarantee. The bonds are issued by Reserve Bank of India on behalf of the government, denominated in grams and sold through banks and designated post offices.
The sixth tranche of SGB will remain open for subscription till November 2, 2016. The nominal value of these bonds was fixed at Rs 3,007 per gram. However, the government decided to offer a discount of Rs 50 per gram, so that the effective issue price works out to Rs 2,957 per gram. The bonds will be issued on November 17, 2016. They will have a tenure of eight years and will allow exit from the fifth year. The interest rate on this tranche has been reduced from 2.75 per cent earlier to 2.50 per cent of the nominal value.
Advantage of Sovereign Gold Bond (SGB) over Gold ETF
How do SGBs compare to ETFs? One area where the SGBs score over gold ETFs is the sovereign guarantee. The government guarantee is applicable both on the redemption amount and on the interest.
Gold ETFs are offered by private sector AMCs and do not have that kind of advantage. But do note that the sovereign guarantee here does not shield investors' capital from volatile gold prices. Both the value of your SGB and the value of your ETF swing up and down with market prices of gold during your holding period.
Secondly, SGBs pay you an assured interest over and above the price returns on gold. Gold ETFs do not give you that comfort and rely only on price returns. Gold bonds offer 2.75% per annum (paid half-yearly) on the initial investment. Thus, investors earn returns linked to the gold price (just like in gold ETFs) plus a fixed annual interest income. The tenure of gold bonds is 8 years but exit options are available in the 5th, 6th and 7th year.
Unlike gold exchange-traded funds (ETFs), the bonds will not be backed by gold but a sovereign guarantee. The bonds are issued by Reserve Bank of India on behalf of the government, denominated in grams and sold through banks and designated post offices.
The sixth tranche of SGB will remain open for subscription till November 2, 2016. The nominal value of these bonds was fixed at Rs 3,007 per gram. However, the government decided to offer a discount of Rs 50 per gram, so that the effective issue price works out to Rs 2,957 per gram. The bonds will be issued on November 17, 2016. They will have a tenure of eight years and will allow exit from the fifth year. The interest rate on this tranche has been reduced from 2.75 per cent earlier to 2.50 per cent of the nominal value.
This Dhanteras, think different and make an auspicious beginning!
Gold comprises the bulk of India's total imports with close to 900 to 950 tonnes of gold imported every year. It is estimated that close to 23,000 tonnes of gold is lying in Indian household. If the ideal gold is deposited with banks, it will enable banks to lend it to jewellers, thereby reducing demand to import gold.
After giving negative returns in the previous three calendar years (2013-2015), gold has rallied around 20 per cent in the Indian market year-to-date. Having run up so much, there is a question mark on whether the yellow metal can repeat its stellar performance in the near term. The possibility of one Fed rate hike this year, and a couple more in 2017, also casts doubt on the yellow metal's prospects in the short term.
My take use Gold investment as a hedging option only and do proper asset allocation based on your risk profile. Equity investment is the one of the best investment to beat inflation and create longterm sustainable growth.
Happy investment
Source:Saralgyan.com
Using BullionVault you can purchase physical bullion by the gram at current market exchange rates.
ReplyDeleteYour bullion is kept at 1 of 5 secure worldwide vaults. And you are able to trade it online or take out physical bars.