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This is an archive article published on November 22, 2009
When it glitters,it must be gold
Away from the uncertainty of the stock market,gold continues to glitter. With prices touching new highs every month,investors swear by the yellow metal.
Written by RituSharma
Chandigarh | November 22, 2009 04:24 AM IST
3 min read
3 min read
With regular rise in gold prices,gold exchange traded funds have rapidly increased in last 6 months
Away from the uncertainty of the stock market,gold continues to glitter. With prices touching new highs every month,investors swear by the yellow metal.
These days,investment in gold funds has emerged as a favoured option.
Gold ETFs (exchange traded funds) have rapidly increased in the last six months. Though new to the country,gold ETFs have given an impressive return of more than 40 per cent in the last one year.
Demat accounts,according to brokers,are being taken over by gold ETFs and investors have grown by around 100 per cent in a year.
Gold fund managers in the tri-city say the trend will only get better. With the uncertainty of shares and the track record of dwindling prices over the last year,gold ETFs promise a regular increase in returns, M L Batra of Angel Broking Limited said. In one year,gold ETFs rose from Rs 1,173.38 to Rs 1,682.76 per unit,an increase of 43 per cent.
The 52-week highest gold price was Rs 1,706 and the lowest Rs 1158.15 per gram.
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Investment experts tracking the trend are expecting the prices to touch Rs 2,000 per gram by early next year.
Investors,meanwhile,are smiling.
In the last 15 years,the dollar has depreciated while gold prices have inched up. The direct impact of the dollar index on gold prices clearly indicates that the demand for gold will rise in the coming weeks. Also,the present trend of countries buying gold is turning out to be a confidence booster for investors, Sanil Vij,a Chandigarh-based investor,said.
Launched in 2007,gold ETFs in India are managed by six companies Benchmark Asset Management,UTI Mutual Fund,Kotak Mahindra Mutual Fund,Reliance Capital Asset Management,Quantum Mutual Fund and the State Bank of India.
What is gold ETF?
Gold exchange traded fund (ETF) is a financial instrument like a mutual fund. Its value depends on the price of gold. In most cases,the price of 1 unit of gold ETF reflects the price of 1 gram of gold.
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With the rise in gold price,the price of the ETF is also expected to rise by the same amount. But unlike the mutual fund,gold ETF units have to be purchased and sold in the stock market.
One needs a demat account and a brokerage account with an online brokerage to invest in gold ETFs. The units can also be purchased through a local stock broker.
Why gold fund instead of solid gold?<><>* Zero concerns about physical security,theft or adulteration when faced with the task of custody and spot transactions.
* Expenses incurred in buying and selling of units will be less than the costs associated with buying and selling of gold and storing and insuring gold bullion in a traditional gold bullionzmarket.
* z Units can be safeguard in the electronic mode in case of unforeseen circumstances.
* Offers transparency and liquidity.
* Capital tax gain is exempted if units are sold after one year.
* A cost effective and convenient way to invest in gold.
It can help save gold for events like weddings.
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