Hi All,

 

I am new to investments, I want to know some information on investing on E-Gold. Is E-Gold funds are commodities or its different. Is there any limited period where i can hold E-gold in my demat account or I can hold this for 1 or 1+ years and Can i sell this at any time.

 

Please advice me on this.

 

Thank You.

Take my advice. If you want to invest in Gold then buy the ETF called GoldBees. It is traded at NSE. You can buy and sell like shares and there are no hidden costs. Keep buying some at every dip in gold prices. All the Best. 

To justify the discussions on paper gold versus physical, there is an interesting analysis that I wish to share with you

Tanishq Gold scheme is, pay Rs. 500 a month for 11 months, the 12th month is free and Tanishq pays a bonus of Rs. 300. So, by paying Rs. 5500 over 11 months, you can purchase Rs. 6300 worth of gold at the end of the year. This seemed too good to be true.

I thought, what if I purchased Rs. 5500 worth of gold now, and see how much I get at the end of the year?

Let's assume the gold price today is Rs. 1500 (yesterday, it was Rs. 1480), and I buy exactly how much I can purchase for Rs. 5500 or 6300. I also assume a 10% increase in gold price the next year (actual increase from last year was 4.5%) and over 5 years, gold price will increase a modest 1.5 times (over the last 5 years it was 1.46 times)

Increase Gold Price Wastage Purchase Price Purchased Gold (g) Sold @ T5 Profit @ T5 Outright – Tanishq scheme
T0 1500 15.00% 1725 5500 3.19 13152.17 7652.17 256.52
T0 1500 15.00% 1725 6300 3.65 15065.22 8765.22 1369.57
T1 10.00% 1650 15.00% 1897.5 6300 3.32 13695.65 7395.65
T5 150.00% 4125

There is no option of buying gold coins, the item with the minimum wastage.

This option is available in UTI Gold ETFs, which I assume, going for the SIP plan, if that exists for gold ETF. UTI roughly traces the day's gold price.

Month Amount Price Units purchased
T0 500 1500 0.33
T1 500 1513.5 0.33
T2 500 1527.12 0.33
T3 500 1540.87 0.32
T4 500 1554.73 0.32
T5 500 1568.73 0.32
T6 500 1582.84 0.32
T7 500 1597.09 0.31
T8 500 1611.46 0.31
T9 500 1625.97 0.31
T10 500 1640.6 0.3

5500 3.51
Average purchase price 1568.1
T5 After 5 years 4125 14468.18
Profit 8968.18


A Bank FD (6.5% ROI, Rs. 5500 for 5 years)
Principal 5500
ROI 6.50%
Duration 5
Amount 7592.31
Profit 2092.31

Thus, Tanishq doesn't seem to offer me the best savings plan as it claims in its brochure. Outright purchase is more profitable than going for this dubious "best savings scheme".

This scheme is definitely not geared towards anyone from middle-middle class or below, since gold is always sold at a premium over the other shops. They wouldn't purchase here in the first place, and they definitely would be prudent enough to see through the smoke.

Excellent analysis VasudhaNJadhav.

It will be fair to assume that Tanisq is doing this to make profits and it's not doing charity.  In such schemes there are a lot of hidden costs which they don't tell you. For example they haven't told how much out of Rs 500 actually goes into buying gold?What if they have a huge expense ratio and other hidden costs. 

These  "too good to be true" schemes should always be avoide. Always go for simple and straight forward investment schemes. GolBees is most transparent and low cost instrument and there is no wastage like in jewellery and coins/biscuits. 

e-gold can also be defined as electronic currency. It is a digital method of buying and storing gold. Also the users of e-gold can make immediate transfer of ownership between themselves. e-gold as investment Though e-gold never possess the quality of investment , a few of investors might use e-gold for investment. The reason is e-gold is also a type of commodity money processing fees When you use or spend e-gold, the processing fees are subtracted from the receiver. The fee varies as per the amount of metal spend. If 0.1 grams of gold is spent, the fee is around 5%. While for 5 grams of gold, it is 1%. And the fee is capped at 0.05 grams for expenditure of above 5 grams.

Thank you all for your reply

Thank you Gurubhai,I request you to educate me regarding Goldbee w.r.t to market fluctuation risk which can be avoided in physical form also I have purchased Silver biscuits @ 51-54 from Waman Hari Pethe with proper reciepts however WHP buys back their own silver at a 10% wastage whereas T.B.Z buys back their own silver at 3% wastage,firstly I would like to know why the difference? Secondly, where can I sell it in Zaveri market for minimum wastage? Is the price appreciation on Silver going to be around 70,whats your take on this one ?

 Dear Vasudha,

The market fluctuation rate can not be avoided in physical form. It's a myth. The price of Gold and Silver is tracked internationally. If you go to a jeweller, you will see the latest rate updated everyday. So do not be mistaken. The physical form comes with 2 risks:

1. Storage issue. Where do you keep it? If you have a locker, how much does it cost? If you keep it at home, how safe is this?
2. Wastage, buyback and purity issues.  In addition you are spending your valuable time in all these transactions.

The advantage of GoldBees or other Gold funds is that it is perfectecly tracked, no storage required, extremely liquid (buy and sell at the click of a button). To avoid market fluctuations you should buy a chunk at every fall in price. This will eensure good returns.

 

Pardon me but I am not too well versed with silver. All I know is that silver has shown tremendous returns and should be a good investment choice. The best way so far is E-silver on NSEL for investments. You should explore this. Here is a related article:  Investing in silver

Well it was informative in generic terms,will have to hunt further for my requirement specific information,btw Gurubhai what is your job profile as you seem pretty active with this portal,I am an account executive with Adfactors PR-Digital Practice. With the kind of inflation rate that is expected a Provident Pension Fund account supposedly a long term tax saver low risk option as well as Fixed Deposits are redundant.We spend at the variable inflationary rate under different heads like : food,consumer goods,education (the highest) etc and invest in fixed returns of 8.5-11.No wonder after slogging it out we reach nowhere therefore I am on a hunt for an inflation proof investment option where in I invest monthly like a Gold/Silver SIP .........

I am a consultant with an IT firm. I have made some investment mistakes in the past and want to make sure that I share whatever I have learnt. Found this potal to be very useful hence I am active. 

You are right about inflation. With this corrupt and worthless Govt. inflation has been probably the biggest issue for common man.  One of the safest way to beat inflation is to do SIP in some good equity funds for a long time. Among fixed income FDs are very attractive right now as they are paying 9.25%. If you opt for 5 year FDs, they provide tax saving as well. So it's a pretty smart choice.If you come across a good mid-cap stock then buy it but only if you are very sure. The returns can beat inflation comprehensively. (picking the right stock is easier said than done). Trading is not good.

Gold and silver have provided very good return in the past but their future can't be predicted accurately. They shouldn't be more than 20% of your portfolio. 

15 Fundamental Reasons to Own Gold 1. Global Currency Debasement The U.S. dollar is fundamentally and technically very weak and should fall dramatically over the next few years. However, other countries are very reluctant to see their currencies appreciate and are resisting the fall of the U.S. dollar. Thus, we are in the early stages of a massive global currency debasement which will see tangibles, and most particularly gold, rise significantly in price. 2. Rising Investment Demand When the crowd recognizes what is unfolding, they will seek an alternative to paper currencies and financial assets and this will create an enormous investment demand for gold. Own both the physical metal and select mining shares. 3. Alarming Financial Deterioration in the U.S. In the space of two years, the federal government budget surplus has been transformed into a yawning deficit, which will persist as far as the eye can see. At the same time, the current account deficit has reached levels, which has portended currency collapse in virtually every other instance in history. 4. Negative Real Interest Rates in Reserve Currency (U.S. Dollar) To combat the deteriorating financial conditions in the U.S., interest rates have been dropped to rock bottom levels, real interest rates are now negative and, according to statements from the Fed spokesmen, are expected to remain so for some time. There has been a very strong historical relationship between negative real interest rates and stronger gold prices. 5. Dramatic Increases in Money Supply in the US and Other Nations Authorities are terrified about the prospects for deflation given the unprecedented debt burden at all levels of society in the U.S. Fed Governor Ben Bernanke is on record as saying the Fed has a printing press and will use it to combat deflation if necessary. Other nations are following in the U.S.'s footsteps and global money supply is accelerating. This is very gold friendly.

All I am saying is do not put all your money in Gold or any single asset class for that matter. The key is to have a well diversified portfolio with stocks, FDs, mutual funds, real estate and gold.A maximum of 20% weightage to gold is good enough in my opinion. 

6. Existence of a Huge and Growing Gap between Mine Supply and Traditional Demand Mined gold is roughly 2,500 tons per year and traditional demand (jewelry, industrial users, etc.) has exceeded this by a considerable margin for a number of years. Some of this gap has been filled by recycled scrap but central bank gold has been the primary source of above-ground supply. 7. Mine Supply is Anticipated to Decline in the next Three to Four Years. Even if traditional demand continues to erode due to ongoing worldwide economic weakness, the supply/demand imbalance is expected to persist due to a decline in mine supply. Mine supply will contract in the next several years, irrespective of gold prices, due to a dearth of exploration in the post Bre-X era, a shift away from high grading which was necessary for survival in the sub-economic gold price environment of the past five years and the natural exhaustion of existing mines. 8. Large Short Positions To fill the gap between mine supply and demand, Central Bank gold has been mobilized primarily through the leasing mechanism, which facilitated producer hedging and financial speculation. Strong evidence suggests that between 10,000 and 16,000 tons (30-50% of all Central Bank gold) is currently in the market. This is owed to the Central Banks by the bullion banks, which are the counter party in the transactions. 9. Low Interest Rates Discourage Hedging Rates are low and falling. With low rates, there isn't sufficient contango to create higher prices in the out years. Thus there is little incentive to hedge and gold producers are not only not hedging, they are reducing their existing hedge positions, thus removing gold from the market. 10. Rising Gold Prices and Low Interest Rates Discourage Financial Speculation on the Short Side. When gold prices were continuously falling and financial speculators could access Central Bank gold at a minimal leasing rate (0.5 - 1% per year), sell it and reinvest the proceeds in a high yielding bond or Treasury bill, the trade was viewed as a lay-up. Everyone did it and now there are numerous stale short positions. However, these trades now make no sense with a rising gold price and declining interest rates.