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Go Ahead, Invest In Gold This Dhanteras

India’s insatiable appetite for gold needs no introduction. Currently, we are the 2nd largest consumer of gold after China. The precious yellow metal has always carried high emotional value, as it is passed on to generations and strengthens bonds. Gold symbolises wealth and holds a religious significance: a mark of Goddess Lakshmi.

Hence, among the physical assets, gold occupies a large space in one’s investment portfolio. Gold is purchased habitually; but the fervour and frenzy is more eye-catching on auspicious occasions, festivities, and gold-buying muhurats

One such auspicious day to buy gold is Dhanteras or Dhanatrayodashi, which is the first day of Diwali. As per Hindu mythology it is said, on the day of Dhanatrayodashi Goddess Lakshmi came out from the ocean of milk during the churning of the Sea. And hence Goddess Lakshmi along with Lord Kuber (known as the treasurer of the world) is worshipped on this day.

Gold and silver (precious metals that associate with wealth) are purchased on this day in various forms: coins, bars jewellery, gold Exchange Traded Funds (ETFs), and so on; as it is believed that this new ‘Dhan’ will bring good luck. In fact, the word Dhanteras itself denotes wealth and prosperity. The environment on streets and at homes is festive and overwhelming.

To buy gold this Dhanteras, here are your few options:

  • Physical gold –– If you are an ardent believer of investing in physical gold, ensure the quality of gold by opting for a hallmarked product. Insist on a hallmark certificate to authenticate the purity of gold you purchase. It will have reference of the year of hallmarking, stamp of Bureau of Indian Standards (BIS), carat (24k or 23k or 22k or 18k and so on), and jeweller identification mark. It is noteworthy, BIS stamp certifies that the precious yellow metal is in accordance to the standards, set nationally across India. If you wish to purchase physical gold in its purest form, consider Axis Bank’s Gold Mohurs (or gold coins) ––which are available in multiple denominations (between 2 to 100 grams). They can be purchased over the counter at over 1,400 branches of Axis Bank.
    When purchasing physical gold, make sure you are purchasing it at a correct, justified price (including the making charges). Purchasing at the right price and paying heed to the quality is also safeguard when you wish to resell gold in time of need. Axis Bank’s Gold Mohurs derive their price from the daily market rates of gold. But the present RBI guidelines do not permit a buyback of the gold coins/bars by banks. Nevertheless, you can always sell at the prevailing price in the open market. If you have purchased gold jewellery from a store, ideally when you re-sell, approach the same jeweller/store so as to obtain a better value considering the weight, quality of the ornament, and the making charges (which are usually deducted). In the interim to hold gold––be it coins, bars, jewellery, utensils and so on–– use your bank locker legitimately to store gold.
  • Gold ETFs –– Gold ETF is an open-ended exchange traded fund (offered by mutual funds) which tracks the price of gold and each unit represents ownership of gold asset. Gold ETFs can be purchased on the stock exchanges (demat and share trading account is a must) and when you buy a gold ETF, you get a contract indicating your ownership in gold equivalent to the rupee amount of your investment. Each unit of gold in the fund that you can buy is equal to 1 gram of gold (some mutual fund houses also offer 1 unit at 0.5 gram of gold). However, the gold is held on your behalf by an appointed custodian for the ETF. You never get to see or receive delivery of the gold you own; but in times of needs the units can be used as collaterals for loans. There are advantages of buying gold ETFs…
    • Convenience: Being traded on the stock exchange, they can be easily bought and sold at the market value. Plus, in the absence of physical delivery they are easy to hold. You do not have to worry about the storage and security aspects that are typically associated in case of physical gold. Your gold ETF holdings are safe in your demat account until they are sold.
    • Quality:You do not have to worry about the quality of the gold that you own; because as per the Securities and Exchange Board of India (SEBI) regulations, the purity of underlying gold in gold ETFs should be 0.995 fineness and above.
    • You don’t have dole out a premium: Unlike physical gold, where you would pay for making charges additionally; gold ETFs are purchased and sold at the underlying prevailing market price of gold.
    • Low cost: Physical gold needs to be stored in a bank locker to ensure its safe. Whereas gold ETFs, since they are held in demat form, have a lower relative holding cost.
    • Resale value:Since the gold ETFs are traded at their prevailing market price, as regards the resale value, you don’t have to worry. The units can be easily sold at the prevailing market price during the trading hours of the exchange. This saves you from the horrendous experience that you may encounter while selling physical gold, where the prospective buyer could doubt the quality of your gold (fetching you a less price) and for jewellers who will deduct making charges thereto.

    Hence gold ETF is considered to be a smart way of investing in gold.

  • Gold saving funds These are fund of fund schemes (offered by mutual funds) which invest their corpus into an underlying Gold ETF. They benchmark their performance against the prices of physical gold, and attempt to provide returns that closely correspond to the returns of its underlying Gold ETF. And unlike gold ETFs, to purchase gold funds a demat account is not necessary; the units allotted reflect in the mutual fund account statement. Compared to gold ETFs, the expense ratio of a gold savings fund is slightly high, but over the long-term the returns can prove rewarding. You can invest lump sum, through SIPs or whichever way is convenient to you. Having said that, SIPs enable regular disciplined investing plus rupee-cost averaging while you endeavour to compound your wealth. Like gold ETFs, investing in gold saving funds is a smart option with merits –––it is convenient, low holding cost, quality is not an issue, no premiums to be paid on purchase, and no compromise on resale value.
  • Sovereign Gold Bonds (SGBs) --SGBs are Government securities denominated in grams of gold (1 gram and in multiples thereof) and come with tenure of 8 years. The bonds are issued by the Reserve Bank of India (RBI) on behalf of the Government at the issue price. They are tradable on exchanges. Premature redemption/encashment is allowed after the fifth year from the date of issue on coupon payment dates. You can approach the concerned bank/Post Office/agent 30 days before the coupon payment date. And please note that a request for premature redemption can only be entertained if you, the investor, approach the concerned bank/post office at least 1 day prior to the coupon payment date. The redemption will happen at the prevailing market price then. On maturity, SGBs are redeemed at the prevailing market price of gold. You also have the option to gift these bonds to your near and dear ones by following legit procedures. During the holding period, you earn interest @2.75% p.a. (fixed rate) on the initial amount in SGBs. They are held in the books of the RBI or in demat form eliminating risk of loss of scrip. How your investment would fare is based on the movement of gold. The application form for SBGs can available with issuing banks ––Axis Bank is one of them ––and with designated Post Offices/agents. Even simpler, you can even download it from the RBI website. You need to comply with the Know-Your-Customer norms to invest, and the minimum investment allowed is 2 grams, while the maximum buying limit is 500 grams per person per fiscal year i.e. April to March. SGB can also be used as collateral in time of need.

Whatever be your choice, gold will always command liquidity and can be looked at as the lender of last resort. This is because of its trait of being a safe haven ––a store of value in times of economic uncertainties, a hedge in a sense. Currently, there are compelling reasons to take exposure to gold: slowdown faced by the economy, global uncertainty, and geopolitical tensions, to name a few.

Remember, the gold isn’t a mere commodity but a vital and an effective asset class from asset allocation plus diversification standpoint. The long-term uptrend exhibited by gold is something you can’t afford to ignore and highlights the importance of owing it in your portfolio. Holding at least 10-15% of your entire portfolio in gold with a long term investment horizon is a prudent strategy

So, go ahead and buy gold this Dhanteras.
Happy investing! And Wish You a Very Happy Diwali!

Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm known for offering unbiased and honest opinion on investing. Axis bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.


Bureau of Indian Standard stamp certifies that the precious yellow metal is in accordance to the standards, set nationally across India.








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