Saturday, September 24, 2011


"The desire for gold is the most universal and deeply rooted commercial instinct of the human race."
Gerald M. Loeb
The above mentioned adage perfectly sums up the love investors have showered on the precious metal since times immemorial. This metal has retained its numero uno pisition as the "Metal of choice" over centuries. So what really makes this metal so desirable inspite of its very limited medicinal or industrial usage? Following are just the few of many reasons responsible for the same :
1. Its widespread use in Jewellery - It has always been used a metal of choice when it comes to Jewellery. In India, for instance, most of the gold demand is on account on Jewellery .This demand for gold jewellery has made India one of the leading countries as far as gold consumption is concerned.
2. It was used as Currency - Gold emerged as a major currency very early during human civilization where kings across continents used gold coins as currency in their respective kingdoms. It was also used as base for new "paper currency" which sovereign governments printed , till very recently. It is still considered as hedge against dollar , the world's reserve currency.
3.Excellent hedge against inflation - Investors flock to gold because it has been proven beyond doubt that it is the best asset class which provides hedge against inflation . Gold investment protects the purchasing power of your investment/portfolio.
Now, if you are wondering how does one invest in gold , then you may want to explore following 3 options:
1. Investment in Gold Mining Funds - You can invest in funds that invest in gold mining funds such as AIG World Gold and DSPBR World Gold Fund. This option will help you own the world's gold reserves and hence as and when gold as an asset class does well, these mining firms will do well and consequently , you as an investor will do well.
2. Gold ETFs - Next, you can invest in paper gold through gold exchange traded fund (ETF), wherein you buy the gold units from the stock exchange for which you need a demat account to buy and sell the units on the stock exchange.
3. Gold Fund of Funds - And more recently, you have the option of investing in a gold fund of fund, such as Reliance Gold Savings, Kotak Gold and SBI Gold fund, which are all passively managed fund of fund that invests in the open-ended Gold Exchange Traded Fund of their fund houses, which in turn invests in physical gold with 99.5 per cent purity. This structure is convenient for those who do not have a Demat account and want to start a systematic investment plan in gold.

Depending on your convenience and investment needs; you can consider any of the options to invest in gold. Amongst the investing option; ETFs and gold funds should be better for the liquidity they offer and the fact that these invest into physical gold, their value will be closest to that of gold.

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