This Dhanteras invest in Gold Monetisation, Gold Bond Scheme: Rajeev Kapoor

Investment in traditional form of gold seems to be passe. This Dhanteras you have two schemes to invest in gold, which is not only hastle free but also ensure you better returns.

In an exclisive interview with Reema Sharma of Zee Media, Rajeev Kapoor, CEO Trustline, shares his views on Gold Monetisation Scheme and Gold Bond Scheme.

Excerpts...

This Dhanteras, what kind of gold investment should people make?

You know, as per Hindu mythology Dhanteras is perceived as an auspicious day that brings good luck when you purchase gold silver or new utensils. In my opinion, people should prefer Sovereign Gold Bond which is the best & new way of investing in gold amongst all available alternatives because it brings interest earning as well.

Has the gold buyer become immune to volatility in gold prices?

It is very difficult to access whether the gold buyer has become immune to fluctuations in the yellow metal or not. It varies from person to person.

The Government has recently launched Gold Monetisation Scheme and Sovereign Gold Bond (SGB) Scheme. How can people benefit from these schemes?

The Government has launched two wonderful schemes like Gold Monetization Scheme and Sovereign Gold Bond. These schemes will not only offer the benefit of Gold price volatility and hedge against inflation but also bear interest yield (interest on the invested amount or amount equaling to the value of Gold deposited), that does not exist in the traditional way of investing in gold like physical gold or Exchange Traded Funds. Moreover, this will save vault charges which are currently being borne by individuals for   safeguarding gold.

The highlights of Schemes are:

GOLD MONETIZATION SCHEME: The monetization scheme is actually a gold savings account which will earn interest for the gold that is deposited and will also save recurring cost. Gold can be deposited in any physical form – jewellery, coins or bars subject to a minimum of 30 grams. Gold saving accounts can be opened for a short term period (1-3 years) Bank Deposit as well as medium (5-7 years) and long term (12-15 years). This gold will then earn interest based on gold weight and also the appreciation of the metal's value. The depositor will get back gold in the equivalent of 995 fineness gold or Indian rupees as depositor desires (the option to be exercised at the time of deposit the gold). Redemption of the Gold Saving account is also possible.

SOVEREIGN GOLD BOND: Minimum investment from 2 grams to maximum 500 grams can be invested by resident of India which includes individuals, HUFs, trusts, universities, charitable institutions, etc. for the period of 8 years with easy exit from 5th, 6th and 7th years onwards, bearing 2.75 percent interest per annum on the amount initially invested. Price of bond will be simple average price of previous week (Monday – Friday) of GOLD 999 purity published by the India Bullion and Jewellers Association Ltd which will also be published on RBI website two days before the issue opens. Moreover, SGB can be collateralized for loans and other purposes. Further, these bonds will also be listed on the exchanges which will provide easy entry/exit route to the investor.

Gold Monetisation Scheme requires melting of gold ornaments before depositing them in banks. Do you think people will let go of their sentimental value related to the yellow metal?

This point is quite debatable and it varies from person to person. Yes, I agree to some extent that some people are attached to their traditions and have been carrying gold since many generations. It might be very difficult for those people to part from their family heirloom.

Please elaborate on a commonly asked question. Many believe that a 2.75 interest on Sovereign Gold Bond Scheme is too less compared to other saving portfolios. Why should they invest in SGB?

I think 2.75 percent interest on Sovereign Gold Bond Scheme is very good as it not only has the benefit of gold price rise but also provides hedge against inflation. Whereas other saving portfolios like FDRs, Government Bonds have only interest yield.

Encouraging participation is required to make these schemes successful as this is the ultimate solution to reduce the country’s dependability on the imported gold and make it self-reliant. It also to some extent will fulfill the gold need for the jewellery industry by rechanneling the 20,000 tones of idle gold lying with households, institutions and trusts. This will ultimately be very useful to bring down current account deficit as gold is the key contributor to it.