Which is better...Physical Gold or Gold ETF?

[shinchan]

:clapping::clapping::clapping:

I share the same views. Short term ---> ETF, long term ----> physical.

I am surprised to see that everyone on this thread favour ETFs. In my opinion, the fundamental reason for investing is gold is as a hedge against extreme devaluation and possible loss of faith in paper and electronic money. It is OK to buy a gold etf for short term (as I myself have done in the past) but not as a long term store of value. This is because ETFs do not keep equivalent amount of gold as the number of units. Theoretically if I buy a unit of GoldBEES, Benchmark is supposed to give me one gram of physical gold. Since Indian regulations are stricter, Benchmark may well have equivalent amount of gold, audited and certified in their custodians vaults. But that is not the case with the gold ETFs in the West, the most popular and most notorious of which is "GLD" fund.

I agree that normally we are not going to run to GoldBEEs seeking our gram of physical gold. But it can happen in case of extreme devaluation of paper currency. Major currencies of the world, USD, Eur, JPY and GBP are all under risk. Value of currencies is a matter of confidence so a loss of confidence in multiple currencies simultaneously will result in investors and ordinary people selling all currencies simultaneously. In such case gold, precious metals and other commodities will be gainers. If we lose faith in the rupee, we may have to ask Benchmark to cough up our gold and if they are not able to deliver, the GoldBEES will become another piece of electronic junk.

This brings us back to the logic of investing in gold (long term). Only physical gold can provide you the kind of security needed at that time catastrophe. So please continue to trade in GoldBEES, but don't invest!!

 

[sahilb]

I am surprised to see that everyone on this thread favour ETFs. In my opinion, the fundamental reason for investing is gold is as a hedge against extreme devaluation and possible loss of faith in paper and electronic money. It is OK to buy a gold etf for short term (as I myself have done in the past) but not as a long term store of value. This is because ETFs do not keep equivalent amount of gold as the number of units. Theoretically if I buy a unit of GoldBEES, Benchmark is supposed to give me one gram of physical gold. Since Indian regulations are stricter, Benchmark may well have equivalent amount of gold, audited and certified in their custodians vaults. But that is not the case with the gold ETFs in the West, the most popular and most notorious of which is "GLD" fund.

I agree that normally we are not going to run to GoldBEEs seeking our gram of physical gold. But it can happen in case of extreme devaluation of paper currency. Major currencies of the world, USD, Eur, JPY and GBP are all under risk. Value of currencies is a matter of confidence so a loss of confidence in multiple currencies simultaneously will result in investors and ordinary people selling all currencies simultaneously. In such case gold, precious metals and other commodities will be gainers. If we lose faith in the rupee, we may have to ask Benchmark to cough up our gold and if they are not able to deliver, the GoldBEES will become another piece of electronic junk.

This brings us back to the logic of investing in gold (long term). Only physical gold can provide you the kind of security needed at that time catastrophe. So please continue to trade in GoldBEES, but don't invest!!

This really is an eye opener. Great Post.

 

[Actor.d]

Hi,
Totally new to investing in Gold. Just wondering what's the difference between investing in gold etf, and MCX gold. To buy gold etf's, do I need to get a commidities account, to trade in the commodities market? I see gold is available in the commodities market as well...is this buying into etf's, or physical gold, or some other form. Request if someone could clarify..
Some very good posts above on why gold Etf's are good to trade in, but not 'invest' in..
Still confused between etf's and commodities markets though..
Thanks

 

[amarpreet]

I am surprised to see that everyone on this thread favour ETFs. In my opinion, the fundamental reason for investing is gold is as a hedge against extreme devaluation and possible loss of faith in paper and electronic money. It is OK to buy a gold etf for short term (as I myself have done in the past) but not as a long term store of value. This is because ETFs do not keep equivalent amount of gold as the number of units. Theoretically if I buy a unit of GoldBEES, Benchmark is supposed to give me one gram of physical gold. Since Indian regulations are stricter, Benchmark may well have equivalent amount of gold, audited and certified in their custodians vaults. But that is not the case with the gold ETFs in the West, the most popular and most notorious of which is "GLD" fund.

I agree that normally we are not going to run to GoldBEEs seeking our gram of physical gold. But it can happen in case of extreme devaluation of paper currency. Major currencies of the world, USD, Eur, JPY and GBP are all under risk. Value of currencies is a matter of confidence so a loss of confidence in multiple currencies simultaneously will result in investors and ordinary people selling all currencies simultaneously. In such case gold, precious metals and other commodities will be gainers. If we lose faith in the rupee, we may have to ask Benchmark to cough up our gold and if they are not able to deliver, the GoldBEES will become another piece of electronic junk.

This brings us back to the logic of investing in gold (long term). Only physical gold can provide you the kind of security needed at that time catastrophe. So please continue to trade in GoldBEES, but don't invest!!

Exactly. The physical gold still remains intact if paper money loses it value.

 

[Capricorn]

7. Gold BeES
Instruments Risk Profile %
Physical Gold Medium 90% to 100%
Money Market instruments, Securitised Debts*, Bonds, including cash at
call
Low to Medium 0% to 10%
* Investments in securitised debts can be made by the Scheme upto 5% of the net assets.
The above stated percentages are indicative and not absolute.
Note: Investment

Why are u guys so paranoid???:lol: Its backed by 90-100% physical gold.

U can go thru the complete doc. here

http://www.benchmarkfunds.com/Documents/SID_ETFs.pdf

 

[krishere]

Exactly. The physical gold still remains intact if paper money loses it value.

what if the benchmark to value currency is itself changed... what if the benchmark is changed from gold to oil???????

 

[sumeetsj]

Different Prespective:

If anyone wishes to invest in cash(black money)then he has got no choice but to invest in physical.
But if at all in physical then one should invest in 99.99 purity and not in ornaments which are mostly 22 carats and carry making/breaking charges.

ETF is also a good option. No doubt about it.

One an also try to invest in mining companies. Eg. BSE code - 512289

SIP method is the best method to invest in Gold.

 

[balssundar]

Which Gold ETF to buy. Investment amount is 10,000. give me suggestion

 

[sumeetsj]

The listed ones are

1. Rel Gold
2. UTI Gold
3. Kotak Gold
4. Gold Bees

There might be more but i know only of these.

Make a watch list. Generally all trade near same levels. Buy the one which has got more liquidity and rate is less.

 

[xenonvideo]

Why are u guys so paranoid??? Its backed by 90-100% physical gold. if this is true the nwhy some etf have more difference then this % in price respect t ophysical gold or even on mcx future? .. coz ETF's do not invest all in physical god they keep some reserve funds .. this tells me to think etf like an MF and so it can go O "zero"

what if the benchmark to value currency is itself changed... what if the benchmark is changed from gold to oil???????

where as physical gold if benchmark moved from gold to oil also then too it will have some value which can not go zero...