With no recurring expenses,e-gold best way of investing over long term

Tracing gold in the past three years

With intermediate glitches,gold has scaled up by over 100% in the past three years. Gold price appreciation in other currencies has been higher compared to the dollar,with the exception of China,which saw severe home currency depreciation. Gold is often considered a safe haven. In turbulent times,one expects the metal to be a store for value. Traditionally,it is a key instrument for diversification and risk management of the portfolio. In 2011,given the across the board increase in commodity prices,brent crude managed to clock close to 14%.

It also remained a good year for fixed-income instruments. Gold was the other asset class that managed to post decent returns during turbulent times in the global markets. Clearly,from being an ‘ornamental investment’,gold has graduated to the status of a genuine investment. Over the years,there has been a greater emphasis in holding gold the virtual way since that is more cost and tax-efficient and is definitely less riskier. Despite all this,there is still a great affiliation towards holding gold in the physical form.

Investing the virtual way definitely scores over holding physical gold in many ways. It is only a matter of time and awareness; the focus would definitely shift to investing via the virtual way.

Further,there is the option of investing via systematic investment in gold ETFs (exchange traded funds) and mutual funds (mining fund). Systematic investment can be done at regular intervals — the frequency could be daily,weekly,bi-monthly,monthly and quarterly. This could enable one to accumulate the asset in phases that will be easy on the pocket and would reduce the downside.

Investing electronically

E-Gold is a relatively new mode of investment in the precious metal,which is yet to catch the fancy of investors. While gold ETF is a more tax-efficient means of investing,e-gold offers the option of physical delivery. Investing via e-gold involves no management cost or other recurring expenses.

It is probably the best means of investing especially,over the long term. The only charges involved are a one-time transaction fee of 2-3 paisa per gram and a brokerage fee of 0.2-0.3%. E-gold provides conversion of accumulated units to physical gold in lesser quantities,such as 8 grams,compared to ETFs,which provide this option only if it is over 1 kilogram.

Besides,the delivery centres of the National Spot Exchange are located in 15 cities,while ETFs have only one delivery centre in Mumbai. E-gold centres also have tie-ups with popular jewellers,one could consider getting the accumulated units made into jewellery by bearing the making charges.

As gold continues to glitter during turbulent times,the big question is whether now is the right time to invest in it. Given the upside that the metal has scaled over the past three months,it looks heated at this point and we would suggest one to wait out and accumulate gold on dips with a long-term perspective. And for someone who is already invested in gold,it may be a good time to offload partially.

* The writer is CEO and founder of Right Horizons