The current Russia-Ukraine war has hard-pressed gold price to a 13-month elevated in the international market to $1,908 per ounce on February 23, and in the domestic market, prices rose to Rs 52,228 per 10 grams at MCX spot, indicating the fair metal’s petition as a protected haven during times of emergency.
Though, gold has come off the highs as risk attitude stabilize after market players assess the force of sanction by US along with other western countries on Russia.
Expert say once the hesitation eases, gold price would tend downward as has been the case in the past. In the household market, gold prices rose 8.5% since January this year. So, should individuals invest in gold as a collection of diversifier and a evade against price rises?
Investments in gold should be done in the monetary forms—Sovereign Gold Bonds and gold exchange traded funds (ETFs). While digital gold sold through wallets or non-broking platforms meet the liquidity criteria, they fall short on regulation and price competence due to high bid-ask reach.
An investor can procure SGBs digitally through the websites of listed commercial banks, bank branches, nominated post offices, NSE& BSE.
Though SGBs pay an annual interest rate of 2.5% payable semi-annually and are tax competent because there is no capital gains tax if held till maturity, they suffer from short secondary market liquidity resulting in price inefficiencies.
A depositor will have to hold the bonds for eight years and will have an exit option from the fifth year which can be exercised on the interest payment days.
Gold ETFs sold by mutual funds are backed by 24-carat corporeal gold and investors do not have to worry about cleanliness or storage. They are open-ended funds and are traded on the exchange at the current market price of physical gold.
One is capable of buy a gold ETF by investing an amount as low as Rs 50 and the transaction can be execute at any time during the trading hours. The profits are benchmarked on the authentic returns on corporal gold, subject to track errors.
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