Skip to main content

Gold ETFs help Portfolio diversification

 


   THE investible potential of gold as an asset class has been a function of jewellery and industrial demand, inflation outlook, strength of the dominant currency, geo-political stability and the gold supply variable. Given the historical and contemporary pervasiveness of gold as a store of value, and to a certain extent, a medium of exchange, gold has adopted a tendency of behaving like a natural currency. Therefore, the investment demand for gold tends to rise in the case of adverse economic conditions, rising inflation, weakening dollar, or general socio-political instability.


   The 15.45% CAGR run-up in gold prices since 2000 was largely attributed to the surfeit liquidity in the early part of the decade, while in the latter half, the turbulent economic conditions, post the sub-prime crisis, contributed to the gold rally. However, despite the teetered recovery in the global economic environment, the optimistic outlook on gold remains unchanged. And here's the reason why.


   Today's geo-political climate has become increasingly volatile, given the ongoing wars in the Middle-east, and the pursuit of nuclear arms by autocratic regimes. This uncertainty has increased further on account of rising tensions in the far-east Asian region.


   Meanwhile, the woes of the global financial economy remain subdued at best. The world's major economies have taken on extensive amounts of debt to keep their economies afloat. To add to that, the economic hardships of Western Europe haven't gone away either. The US economic performance, too, remains modest, with the unemployment situation continuing to worsen.


   Albeit the fear of a double-dip recession in the US and the EU may be unwarranted, yet there is a rising speculation, bordering to near certainty that the Fed-led quantitative easing may be on cards. Consecutively, the key global debt markets continue to remain defensive and maintain a relatively-high risk perception, which in turn, fuels the investment demand for gold.


   Also, traditionally, the gold demand has a seasonal flavour with the intra-year peaking in around November-December. This is attributable to post monsoon festivities in India, corresponding gold inventory expansion by American and European retailers, and the week-long national celebrations in China. Besides, the central banks (bankers) continue to remain net buyers of gold. The interplay of these factors provide a potent case for investment in gold.


   But, from the retail investor point of view, the physical investment in gold has a minor side-effect. Buying physical gold involves the risk of theft, misplacement and potential wrong-pricing. Additionally, when an investor needs to sell his physical gold, again at that point, he/she has to go through the inconvenient route of valuation, bargaining, transaction and delivery.


   All these angles involve risk, skill, and time — making the whole process inconvenient. But thankfully, an alternative method to invest in gold exists. That too without the inconvenience of the physical transaction — that is the Gold Exchange Traded Fund (GETF).


   Gold ETF is nothing but pure gold, traded online through a medium of exchange. Normally, each unit of a gold ETF is worth approximately 1 gram of gold at any point of time. The investors' take-away from GETF is that it allows the investor to invest in gold without bothering for the purity, security or liquidity of gold investment that is attendant with gold hoarding. GETF's online tradability and transactability is exactly like any other stock scrip, making buying and selling an almost intra-day day affair — an idea quite difficult with physical gold.


   In other words, what GETF does is that it gives you the ability to buy, sell, or hold gold at convenience. This idea, though relatively new in India, is quite popular elsewhere in the world. (has caught majorly elsewhere in the world). In India too, with rising awareness, Gold ETF is gaining ground.

 

Popular posts from this blog

Group Health Insurance

Buy Group Health Insurance Online   For Human Resources, the biggest challenge today is to decide whether medical benefits should be offered to employees or not, what type of plans should be offered, what will be the cost and how will the cost be split between employees and employer. Well, most of these are subjective and would depend on a lot of factors including company size, average employee salary, etc. However, this article will give you a fair idea on how you should go about deciding these factors: 1. Why offer group health insurance benefit to employees : Studies have proved that retention rates among employers offering GHI are much higher than the ones who are not offering. Moreover, the cost of providing this benefit as a percentage of salary is very low as compared to the perceived value. As an example, say if average salary of an employee in your organization is 4 LPA. If you decide to offer a health insurance benefit to him for a Sum insured of ...

ICICI Prudential Dynamic Plan Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   ICICI Prudential Dynamic Plan             Invest Online This fund does remarkably well during falling markets, but fails to show the same prowess during a rising market. The fund sticks to its mandate to adapt to the dynamic nature of the market by shuttling between debt and equity. It takes aggressive asset calls in equity when the market surges by investing in quality mid-cap stocks. At the same time, it adopts a defensive strategy by investing in debt and cash when markets get overvalued, making it a good long-term choice.     For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call     Leave a missed Call on 94 8300 8300   Leave your comment with mail ID and we will ...

Why credit history is critical?

Will you need a loan to buy a car or a house? Do you know why some people get their loans sanctioned quickly without any hassle, whereas others find that their approval is delayed or their application is rejected? If you want a loan, you will need to work to build a solid credit history because this can have a bearing on the ease with which you get loans. Read on to learn more about what is a credit history and how to build a good credit score. What is a credit history? Your credit history is a way of tracking your credit behaviour and habits — basically it shows how disciplined and regular you are when it comes to repaying your dues on loans that you have taken. It will show a complete record of your past borrowing and repayment record including details about any late payments or if you have defaulted on a loan. This track record is readily accessible to lenders and is used by them to when reviewing your loan application. Borrowers who have historically had a bad record of managing...

JM Financial Mutual Fund - Its Schemes

  JM Financial Mutual Fund is a part of JM Financial Group which is one of the first mutual fund companies in India which started its operation in 1993-1994. JM Financial Asset Management Limited is sponsored by JM Financial group. The mission of the group company is to generate good returns in all the product categories. JM Financial Mutual Fund has launched a variety of schemes in the following categories. ·                            Equity ·                            Debt ·                            Arbitrage ·                            Liquid Equity Schemes: The schemes that are launched in the equity category are: ·                            JM Midcap Fund ·                            JM Balanced Fund ·                            JM Agri and Infra Fund ·                            JM Basic Fund ·                            JM Contra Fund ·                            JM Contra Fund ·                            JM Emerging Leaders Fund ·             ...

Commercial Paper (CP)

Invest Mutual Funds Online Download Mutual Fund Application Forms Commercial Paper (CP): These are issued by corporate entities in denominations of Rs.2.5mn and usually have a maturity of 90 days. CPs can also be issued for maturity periods of 180 and one year but the most active market is for 90 day CPs.   Two key regulations govern the issuance of CPs-firstly, CPs have to be compulsorily rated by a recognized credit rating agency and only those companies can issue CPs which have a short term rating of at least P1. Secondly, funds raised through CPs do not represent fresh borrowings for the corporate issuer but merely substitute a part of the banking limits available to it. Hence, a company issues CPs almost always to save on interest costs ie it will issue CPs only when the environment is such that CP issuance will be at rates lower than the rate at which it borrows money from its banking consortium. ----------------------...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now