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Friday, June 17, 2011

Making Savings a Habit and investing in metals !!

Do you know what this is ?

This perhaps is the time most companies revise the CTC of employees and pay their bonus and consequently the bank accounts of some would have swelled  bringing in happiness and providing minor worry of how to save ?  Sometimes Companies also give Corporate gifts of Gold or Silver coins commemorating some special occasions.   I had on  more than a couple of occasion written to you on saving money in the form of buying gold.  Be clear – buying Gold or investing in Gold and buying gold ornaments are poles apart !  The former is an investment for the future, the other is an unavoidable expenditure !!

Some of us who are  middle aged are more worried about the future and have been thinking of the habit saving something every month.  It is an inflationary trend where the general level of prices of goods and services keep soaring over a period of time.  When the price rises, each unit of currency buys fewer goods.  Investment on  yellow metal has been recommended as a hedge against inflation.  A gold coin is a cute thing irresistible to look at.  The yellow metal has been used for coins from times immemorial, mainly because of its intrinsic value.  Of course keeping gold physically is wrought with innate difficulties.  Now coins are available everywhere right from online buying from trusted websites to famous retailers like Tanishq,  local famous shops like GRT, Vummidiars, Saravana.  .  Even Banks and Post offices sell gold coins of different size and weight.  For amounts exceeding 5 lakhs, you need to furnish your PAN No.  but Banks will not buy back your gold coin and also remember that when you buy the rate is inclusive of a small premium – so an immediate sale may not fetch you any returns.

To reiterate – before you rush to buy kgs of gold – don’t have unrealistic growth expectations to becoming rich overnight. Plan your investment and keep looking for the fluctuation to take a ride on the waves.  Even in a country where people are fascinated with gold (ornaments !!) there are some who have made good investments.  To many Indians, Gold is a symbol of power and wealth.

If you are not the one lured by physical attraction of yellow metal, then Gold Exchange Traded Funds [Gold ETF] are the right thing. They are traded on major stock exchanges and you would require a Trading account for buying this and holding gold in e-form.  There are hosts of funds available in the Country and some are : SBI Gold ETF, Gold Benchmark ETF [Goldbees]; UTI Gold, Kotak Gold, Quantum Gold and Reliance Gold.  You can buy units of Gold – generally one unit represents one gram and you can buy in multiples of a gram depending upon your choice, need and of course bank balance !!

For some extra information for the prospective buyers – these are the indicative rates of various ETF in India :

Axis Gold Rs.2200/- ; SBI Gold Rs.2212/- ; HDFC Gold Rs.2210/- ; Gold Bees Rs.2160/-  ** Remember these are not the rates of physical gold coins but the rate per unit of Gold ETF.  Again for knowing, the 52 week high for Axis Gold is Rs.2500/- with low at Rs.2012/-

All that glitters is not gold and life is not only about the yellow metal. There is another cousin equally shining.  The one with the chemical symbol ‘Ag’ – soft, white, lustrous transition metal, having the highest electrical conductivity and one in pristine pure form considered auspicious  -  the Silver.  Silver has been valued as a precious metal for long and is also used to make ornaments, jewellery, high value utensils [silverware] and considered prestigious.  Born with a silver spoon is a common idiom and eating in a silver plate is considered exhibiting one’s richness.  Silver is used in electrical contacts, conductors, as catalyst, photographic film and more.  Silver is ductile, malleable and reveals metallic luster with polish.   

From time immemorial silver has been used as a medium of exchange and silver coins were minted by various Rulers.  Till a couple of centuries ago, Nations were on a silver standard with silver coins forming the main circulating currency.  Understand that Mexico still uses silver albeit in small amounts in its circulating coins.  The Royal Canadian Mint issues a 5 dollar 9999-fine silver bullion coin, the silver Maple Leaf, and Australia offers a 5-dollar, 1 ounce 999-fine silver bullion coin, the Kookaburra  - these are extremely popular with investors and collectors.

One need not look to history – in the recent few years silver rates have been dangling.  Some reports state that 55% is the return in the past year alone.  The rate of silver today is Rs.53150/- per kg and retail silver is much higher at Rs.57.25 per gram.  In Jan 2011, it was looming around Rs.41 to 43 thousands per kg and in Dec 2008 it was around Rs.17820/-  -  what a change !!

Like Gold, most Jewellers do sell silver coins and bars also.  MMTC also sells silver coins.  Their brand is Sanchi which is for the quality conscious consumer.  They have attractive silver ware  and are known for purity, quality and design. . India’s appetite for silver has been boosted because gold has become too expensive at current prices.

One catch could be, silver cannot be easily sold back in the market. 
Unlike Gold, silver is not available for purchase in e-market as trading is not yet authorised by the market regulator Securities and Exchange Board of India or commodities market cop, the Forward Market Commission.   It is stated that though many companies are keen on launch of  Silver ETFs, the launch of the exchange traded funds in the white metal has been stuck in regulatory frameworks.  These funds are floating in markets abroad already.

So where are you heading for !!

The one at the start is the Royal Canadian Mint’s Lunar Scalloped Coin designed  showing the rabbit poised on its hind legs beneath a tree.  As you would know the year 2011 is the year of Rabbit going by Chinese zodiac.

Regards – S. Sampathkumar.

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