Almost every house in India, invests in precious metals, especially gold and silver. NSEL (National Spot Exchange limited), India has give a chance to retail investors to enter into the commodities market through its E-series product and invest in demat gold. Currently, NSEL offers only gold and silver trading in their E-series, but there are plans to include copper and nickel too. Rather than investing in physical gold, one can hold gold or silver in demat account, as it not only saves locker and insurance costs but can be bought in very small quantities. Small time investors can invest in small denominations, like 1 gram, 2 grams and so on, regularly.
Requirements:
Retail investors can open a demat account with any of the Depository Participants (DP) of NSEL like Karvy, IL & FS, Religare, Goldmine, Monarch Capital, SMC, SSD securities, India Infoline, and trade in this, just like mutual funds or equity shares. Visit this link for the full list of empanelled DPs for us to trade in egold and/or esilver. But remember that you need to have a separate demat account for trading e-gold and e-silver in commodities market backed by National Spot Exchange limited. Like with equities, trading settlement is done on T+2 days.
The holder can also take physical delivery of the gold, if he wishes to, by surrendering the required units to the exchange. Presently, there are three centers which offer physical delivery of gold in India and they are on the process of increasing this to many more cities in India.
Advantages:
Investing in e-gold and e-silver are seen as safer options today since they are not affected by inflation and other economic risks. Since gold is an excellent hedge against inflation, it is always best to buy gold as a short or long term investment.
E-gold and e-silver investment gives better returns as compared to ETF's since the fund houses charge additional costs like AMC, vault charges which are comparatively lower here. National Spot Exchange charges 0.4 % annually while it is 2.5 % for ETFs. Transparent pricing, seamless trading, no holding cost are some of the advantages of e-gold and e-silver trading. Hassle free buying and selling of commodity is possible in demat gold and silver. It is emerging as a better alternative to ETF, which is like any other mutual fund.
Disadvantages:
The buyer is not the outright holder of the gold as the institution holds the metal on his behalf. With e- gold, security is always an issue as there is always a risk of account being hacked. Due to security breach losses can occur, which are irreversible but perhaps you are protected by insurance against this issue. Also there are custody charges that one has to pay at 60 paise per month.
This is just another way to buy our favorite commodity in which our Indians are more attached to than ever, the gold as well as silver. I would personally suggest you to go for this to buy e-silver if you already have a gold ETF account. But if you are looking have physical gold at the end of the investment period or when needed, go for e-gold offered by them.
