Looking at the Indian tradition and culture most of common man are attached to gold in various forms i.e. gold coins, bars, jewellery, etc. You would invest in gold to hedge against rising inflation cost or for short term to earn some profit in rising gold prices. Now-a-days while investing in gold retail investors take into consideration the liquidity, cost, quality and security of this gold as an investment. But, it’s difficult to answer which option is best while investing in gold among various alternatives and how secure your investment is…??
To benefit investors in gold National Spot Exchange Limited (NSEL), India has come up with the handsome solution for the problem mentioned above by offering E-series to invest in gold. In this, Indian retail investor can trade in commodities especially precious metal like gold in e-form. Like equities one can keep their gold in demat form, which not only saves on insurance cost and locker rent but also invest in small denominations.
Points to remember while investment in gold as e-form
1) Retail investors are require to open a demat account with any of the Depository Participant (DP) of NSEL, India. You need to have a separate demat accounts for commodities and for equities.
2) Trading settlement is done on T+2 days.
3) You can take physical delivery of gold by surrendering the required units to the exchange. Presently there are three delivery centers of gold in India i.e. Mumbai, Delhi and Ahmedabad.
Pros of investing in gold as e-form
1) An investor can buy and sell gold in small denominations. For example: 1gm or 2gm of gold.
2) Transaction reflects in your demat account.
3) Gold rates on NSEL are based on Indian market rates.
4) Transparency in pricing and seamless trading is key advantages of trading in e-product.
5) No holding cost.
6) E-gold gives better returns as compared to ETFs, since fund houses charges some additional costs. NSEL charges 0.4% while it is 2.5% for ETFs.
7) Easy liquidity as you can sell it off whenever required.
Cons of investing in gold as e-form
1) There is no personal feeling of holding the gold in hand as DP holds it on our behalf.
2) Hacking of account sometimes an issue leading to security part.
3) Custody charges 60 paise per unit per month.
Comparative chart to analyze investment in Gold ETFs v/s E-gold
Investors who take an advantage of E-gold and include them as part of their investing strategy reap many of these benefits. There is only one transaction per trade, so commissions are on lower side. E-gold more or less is also a "tax friendly" investment product in comparison to gold ETFs without any fund management fees. The risks involved in gold ETFs are not visible while investing E-gold. Also, E-gold, in comparison to the ETFs, is fairly straightforward as investors are able to buy or sell gold at their discretion.
To conclude would like to mention one should choose e-gold as an investment avenue while comparing to gold ETFs and physical gold because there is no tension of theft, burglary and losses due to any such kind. You will get more safety and security at lesser cost going e-way while investing in gold..!!!
(The article is contributed by CA Priya Shah, a self employed tax consultant. She can be contacted at capriyarshah@gmail.com)