GOLD ALL TOLD:

There is no reason to panic on the note issued by Ministry of Finance on Gold. Media is unnecessarily trying to create mountain from the molehill on this particular story. This is the repeatation of old guidelines framed by Central Board of Direct Taxes i.e. CBDT decades ago. A married woman can have 500 grams, unwed daughter 250 grams and a man can possess 100 grams for which no explanation is required. I am not a great fan of Investing in Gold as a tool for Wealth Creation. We always advice our clients to buy gold only for social needs and personal use. This way the ladies are extremely happy and gents save their money. Jokes apart, gold should not form more than 10% of a portfolio. However, in India wealth is disproportionately locked up in Real Estate and Gold. There was a pie chart I saw the other day which showed even cash in hand is greater than Financial Assets like Equity Mutual Funds. Now this is criminal waste of wealth generating opportunities.


Gold is considered as a hedge against inflation and is one of the most liquid assets. However, historically over a long term it has produced returns of 6-7% compounded. In India gold is taxable. The best way to invest in Gold in India currently is through the subscription of Sovereign Gold Bonds. These are issued in tranches by government of India. If at all you want to diversify into Gold, Sovereign Gold Bonds or Gold funds are the best options available.

I rest my case about Gold by quoting Warren Buffett on the same subject:

“If you took all the gold in the world, it would roughly make a cube of 67 feet on a side. This would be worth around 7 trillion dollars……..For this much value you can buy all the farmland in the USA, about 7 Exxon Mobils and you can still be left with a trillion dollars. Now if you offer me choice of looking at some 67 foot gold cube all day long and touching and fondling it occasionally……..I will take the farmland and the Exxon Mobils.”

Equities are real Gold over long term, the sooner you realise this the better. Buy gold for personal use not for earning returns. 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s