This blog does not recommend using any of the investment techniques or specific stocks mentioned. The goal is just to explore different options through examples.
Physical Gold
Go to reputed jewelry shops and buy gold bars, biscuits, coins or jewelry. This will come with lot of maintenance overhead but will make the women in your family happy besides providing the most guaranteed investment in gold. On the flip side there are risks of robbery and higher costs of acquisition as well as depreciated value while converting back to cash in the name of various charges added by the retailer.
Gold ETFs
You can buy reputed gold ETF's online. These are liquid instruments and easily tradeable but not guaranteed to be backed by physical gold. In extreme situations the ETF provider can default making it less guaranteed instrument than physical gold. However the risk lies in only very extreme situations
Gold Bonds
These are floated by the government and select financial institutions and banks and are certificates that you can purchase instead of buying physical gold. These are government backed and hence carry extra guarantee and safety. It can be still less guaranteed than physical gold in case of government defaults
Commodity Trading Accounts
Through commodity trading accounts you can take long positions in gold. In India you can do it through MCX. Note that commodity exchange is expected to guarantee your contracts with underlying physical asset. However these are not regulated very strictly and there are chances of default both from the counter party as well as the exchange.
Gold loan companies
These are companies that offer loan against gold pledged to them. Usually they build large reserves of gold holding in this business. While they do not benefit directly from the price of gold they do benefit indirectly from high value transactions and low defaults in case of rising gold prices. Also note that they do collect good amount of gold reserves from loan defaulters. Some companies in Indian stock exchange include Muthoot & Manappuram finance
Gold mining companies
Companies with gold mining lease who can benefit significantly from rise in gold rices as the value of their asset will increase proportionately. In India there is only one listed entity in this space i.e Deccan gold mines, however it is yet to start commercial production. Internationally you will find many more high quality companies. However make sure that they are gold focused and not heavily diversified else all the gains in gold assets will get drained in other non-precious mining assets that are in a severe bear phase at present.
Gold dealing companies
Trying to play with gold jewelers can be a risky bet since their situation will depend on how they manage their inventories and how transparent, ethical and shareholder friendly they are. Since rising gold prices will attract more retail buying, efficiently managed companies might benefit like Titan. However real benefit will come for companies who have complete backward and forward integration like Rajesh exports. There could be some underdogs like Shirpur Gold refinery but they are yet to prove themselves as serious and shareholder friendly business house.
Why Gold?
In the current situation paper assets like stocks, currencies, bonds, lack any fundamentals or are highly overvalued and are manipulated by central banks and governments. This asset class has already entered a highly volatile and high risk phase. There can be a steady outflow from these assets to assets with hard fundamentals like gold & silver. Due to turmoil in the world markets and commodity space there is a high chance that many currencies and bonds will be discarded as junk as the countries backing them face high default risks. With geopolitical tensions rising around the world there can be a major flight from high risk assets to safe heaven assets that includes gold. Along with geopolitical risks currently many countries face a very high probability of a civil war like situation internally. Gold is currently available at near production costs and there could be a cyclical uptrend in this precious metal commodity space. Many institutions might increase their gold exposure as a hedge to the rest of their portfolio. Weak economic recovery can lead to continued lower US fed rates and QE in many other countries however appetite for risky assets is decreasing steadily as traders have already started making huge losses due to high volatility. In such a situation any extra cash positions will be used for instruments like gold instead of any other high risk investments. I am hearing lot of noise on gold from lot of influential names. That is a good indication of something big coming up.
Overall at present gold makes sense and you can use a combination of above discussed alternatives to increase your holding in gold.
Is it urgent?
Nothing is ever urgent. Investment is a game for slow, steady and patient players only
Physical Gold
Go to reputed jewelry shops and buy gold bars, biscuits, coins or jewelry. This will come with lot of maintenance overhead but will make the women in your family happy besides providing the most guaranteed investment in gold. On the flip side there are risks of robbery and higher costs of acquisition as well as depreciated value while converting back to cash in the name of various charges added by the retailer.
Gold ETFs
You can buy reputed gold ETF's online. These are liquid instruments and easily tradeable but not guaranteed to be backed by physical gold. In extreme situations the ETF provider can default making it less guaranteed instrument than physical gold. However the risk lies in only very extreme situations
Gold Bonds
These are floated by the government and select financial institutions and banks and are certificates that you can purchase instead of buying physical gold. These are government backed and hence carry extra guarantee and safety. It can be still less guaranteed than physical gold in case of government defaults
Commodity Trading Accounts
Through commodity trading accounts you can take long positions in gold. In India you can do it through MCX. Note that commodity exchange is expected to guarantee your contracts with underlying physical asset. However these are not regulated very strictly and there are chances of default both from the counter party as well as the exchange.
Gold loan companies
These are companies that offer loan against gold pledged to them. Usually they build large reserves of gold holding in this business. While they do not benefit directly from the price of gold they do benefit indirectly from high value transactions and low defaults in case of rising gold prices. Also note that they do collect good amount of gold reserves from loan defaulters. Some companies in Indian stock exchange include Muthoot & Manappuram finance
Gold mining companies
Companies with gold mining lease who can benefit significantly from rise in gold rices as the value of their asset will increase proportionately. In India there is only one listed entity in this space i.e Deccan gold mines, however it is yet to start commercial production. Internationally you will find many more high quality companies. However make sure that they are gold focused and not heavily diversified else all the gains in gold assets will get drained in other non-precious mining assets that are in a severe bear phase at present.
Gold dealing companies
Trying to play with gold jewelers can be a risky bet since their situation will depend on how they manage their inventories and how transparent, ethical and shareholder friendly they are. Since rising gold prices will attract more retail buying, efficiently managed companies might benefit like Titan. However real benefit will come for companies who have complete backward and forward integration like Rajesh exports. There could be some underdogs like Shirpur Gold refinery but they are yet to prove themselves as serious and shareholder friendly business house.
Why Gold?
In the current situation paper assets like stocks, currencies, bonds, lack any fundamentals or are highly overvalued and are manipulated by central banks and governments. This asset class has already entered a highly volatile and high risk phase. There can be a steady outflow from these assets to assets with hard fundamentals like gold & silver. Due to turmoil in the world markets and commodity space there is a high chance that many currencies and bonds will be discarded as junk as the countries backing them face high default risks. With geopolitical tensions rising around the world there can be a major flight from high risk assets to safe heaven assets that includes gold. Along with geopolitical risks currently many countries face a very high probability of a civil war like situation internally. Gold is currently available at near production costs and there could be a cyclical uptrend in this precious metal commodity space. Many institutions might increase their gold exposure as a hedge to the rest of their portfolio. Weak economic recovery can lead to continued lower US fed rates and QE in many other countries however appetite for risky assets is decreasing steadily as traders have already started making huge losses due to high volatility. In such a situation any extra cash positions will be used for instruments like gold instead of any other high risk investments. I am hearing lot of noise on gold from lot of influential names. That is a good indication of something big coming up.
Overall at present gold makes sense and you can use a combination of above discussed alternatives to increase your holding in gold.
Is it urgent?
Nothing is ever urgent. Investment is a game for slow, steady and patient players only
free Gold on my site
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