Gold still the best option for investors
Gold still the best option for investors
Updated on Friday, May 6, 2011, 17:50 Print Email
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Gold and silver prices are surging to a new peak almost every day. Market is jubilant as the precious metals are crossing their own records. Sustained buying by speculators, a strong rally in overseas markets and hectic buying by stockists and retail customers ahead of `Akshya Tritya`, gold and silver seems to be the most preferred investment option.

In a special conversation with Reema Sharma of, SK Jain, Vice President of All India Sarafa Association shares his views on gold and silver’s investment prospects.

What kind of demand for gold do you see this Akshay Tritiya?

Generally the trend this year is that people are buying both silver and gold. I think the demand is certainly going to be something between 15 to 20 percent this year. The spurt in demand is because of the high returns that gold and silver have given this year. Silver astoundingly has given more than 150 percent return in the past one year.

How was the demand last year?

Last year there was a five to seven percent demand. This year there will be a hike in demand. Despite inflation and price rise, people will buy these precious metals because they are safe haven investment. Although gold and silver prices have dipped in the past and again took an upward bias, the optimism in buying remains the same. People won’t shy away from investing.

What mode of investment do people prefer?

People are more interested in buying raw silver and raw gold. These have a lot of prospect in terms of future investment. Other than buying gold, people prefer investing more in silver. While buying gold, people prefer purchasing gold coins and the mode of buying silver is raw silver.

What trend do you see in mid, short and long term investment?

Ultimately there will be no dearth in long term demand. Inflation is very high. If you think of short term investment it will not be a bad idea either. Gold and silver both have this unique quality of liquidification. You can buy and sell them any time without bothering about the returns. It is true that the price of gold is rising everyday and crossing all time high level. But it’s never too late. You can start buying from today. If you sense that returns are not positive you can dispose it. And for that matter one need not worry. Gold and silver prices will rise further even if they dip for a week or so.

Given the current trend, how much should one invest in gold?

One should invest 20 percent in gold. On a scale of 100, you should spend 20 on gold, 20 on silver and rest on mutual funds, shares and stocks. A 50-50 investment module might not work for the small time investors. They won’t be able to carry the burden of the fluctuation in the prices of these precious metals. For instance, last year gold prices didn’t go up for the entire year. If someone invested 50 percent of his total investment in gold, he would have had a very tough time. I think anyone with a good holding power should invest. Short term investment is also possible if you have a good holding power.

What impact does custom duty and Vat have on investment?

Custom duty matters but Vat hardly matters. Whenever you buy something you pay Vat for that. The same goes for gold and silver too. But custom duty casts a very negative impact. We have written to the Prime Minister as well as the Finance Minister to reduce the import duty. Earlier the custom duty was Rs 200 per gram for gold and Rs 500 per kilo of silver. Eventually, the burden of this custom duty has to be borne by the consumer only. If we are a truly globalised economy why should we hike the custom duty? International prices are the same only.

What is your opinion on future trading?

Future trading is very harmful for the customer. Take for instance MCX trading. The impact is horrible because such trading encourages betting in gold and silver. We have written to PM and FM and have urged them to exclude gold and silver from MCX trading. We wrote it in the past too. We will keep writing and urging for disallowing gold and silver trading from MCX.

How do you perceive hallmarking?

I am a member of the hallmarking committee. In 1984 we suggested that gold and silver should be hallmarked. The only equation is simple - more the density of the gold, higher the price. And this way purity of gold is not being compromised. If you want to invest in pure gold or hallmark gold, you will have to pay a slighter high price. But you can also ensure the quality whether it is 916, 750 or 14 carat. I understand that the price of hallmarking is huge. For three years the retailer has to pay 30 thousand per hallmarking, irrespective of the fact that it is for 10 items or for 50 items. If you want to popularise hallmarking, the fees structure has to be reframed. Hallmarking should be made a onetime affair and it can be monitored regularly. The hallmarking price is so high that small time retailers shy away from it. This should be addressed on a priority basis.

Is silver the best option now?

Silver is not the only bet. Couple of days back silver prices went down by Rs 3000. It might be a bad news for short term investors, but gradually prices will again go up. Therefore it is advisable that investors spend both in silver and gold.
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