Gold ETF compulsory delivery

#1
Hello Friends,

Does Gold ETF have things like compulsory delivery or any other such thing that would put one into trouble? Is it similar to investing in Nifty ETF or are there any differences between the two? Pls guide

Thanks

Karuna
 

comm4300

Well-Known Member
#2
Hello Friends,

Does Gold ETF have things like compulsory delivery or any other such thing that would put one into trouble? Is it similar to investing in Nifty ETF or are there any differences between the two? Pls guide

Thanks

Karuna
gold ETF is just like anyother etf, if you buy - shares will come into your demat a/c; if you sell - they will be debited.

as far as you are concerned - there is no real gold delivered to you or taken from you, just units.

Yes, similar to investing in nifty etf.
 
#3
gold ETF is just like anyother etf, if you buy - shares will come into your demat a/c; if you sell - they will be debited.

as far as you are concerned - there is no real gold delivered to you or taken from you, just units.

Yes, similar to investing in nifty etf.
Comm4300, thanks for your reply. I have one more question. Is it the same even in Gold Mutual funds, meaning no such thing as delivery and all, right? Just pay money, then if gold price rises/fall, we make profit/loss, correct?

Thanks
 

Catch22

Well-Known Member
#4
Comm4300, thanks for your reply. I have one more question. Is it the same even in Gold Mutual funds, meaning no such thing as delivery and all, right? Just pay money, then if gold price rises/fall, we make profit/loss, correct?

Thanks
Yes it is like any other Mutual funds.Would be better to the sip manner .
This my view .There will be better suggestions from others .

Would like to know , from anyone here .is there a scheme that the present govt has made to avail interest utilizing physical gold please?
 
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mastermind007

Well-Known Member
#5
Comm4300, thanks for your reply. I have one more question. Is it the same even in Gold Mutual funds, meaning no such thing as delivery and all, right? Just pay money, then if gold price rises/fall, we make profit/loss, correct?

Thanks
Gold Mutual fund is fundamentally different from a Gold ETF. They are similar in a sense that you do not get physical delivery.

As far as I know, biggest difference is that a mutual fund has one more layer of team (fund management) between you and the actual end product. So, you incur recurring management costs.

The companies that manage mutual fund can and do switch investments. They are allowed to invest directly in Gold as well as industries that add value to Gold (ornament making, industrial use, recycling Gold from old electronic and auto parts).

ETF on other hand have restricted investment basket and the recurring costs (if any) is due to your own DP account. Since, you are buying small value, they too have management but the management is far more inert relative to a Mutual fund.

Both may have capital appreciation (or depreciation) and both may pay dividends.
 

Catch22

Well-Known Member
#6
Yes it is like any other Mutual funds.Would be better to the sip manner .
This my view .There will be better suggestions from others .

Would like to know , from anyone here .is there a scheme that the present govt has made to avail interest utilizing physical gold please?
Got the answer.

Have gold? Turn it into interest-free cash soon with monetisation scheme

http://www.hindustantimes.com/busin...t-s-monetisation-scheme/article1-1348840.aspx

The government could allow Indian families to deposit gold with banks in return for interest payments as part of a plan to put thousands of tonnes of the precious metal stashed at homes into the financial system. The finance ministry released on Tuesday the draft of a "gold monetisation scheme" that will allow individuals to park a minimum of 30 grams of gold with banks and earn tax-free interests. Finance minister Arun Jaitley had revealed the government's intent to launch the scheme in his 2015-16 Budget speech, aimed at mobilising unproductive gold owned by Indian households into cash.

Indians' penchant for gold spans centuries and is rooted in religion as the stockpile with households, which is neither traded nor monetised, is estimated to be over 20,000 tonnes, worth about Rs 60 lakh crore at current market price. A large amount of it is held by temples and other religious institutions.



Gold is also an instrument of financial security for 70% of India's rural population. The government is trying to convince households, who sometimes have little faith in financial institutions, to break the tradition and hand over gold passed down the generations. The draft released on Tuesday says a person or institution holding surplus gold can get it valued from BIS-approved hallmarking centres, open a "gold savings account" in banks for a minimum of one year and earn interest in either cash or gold units. The interest earned on it would be exempt from income tax as well as capital gains tax.

The draft, citing an instance, says if a customer deposits 100 grams of gold and gets 1% interest, he will have a credit of 101 grams on maturity. The interest will be paid after 30 or 60 days of opening the account. The depositors will have the option of getting back their asset either in cash or gold, but this has to be specified at the time of making the deposit.

The new scheme, proposed to be introduced in select cities initially, will boost the gems and jewellery sector and cut expensive imports. The country is one of the largest consumers of gold in the world and imports as much as 800-1,000 tonnes of the metal each year. The finance ministry has sought comments from stakeholders by June 2.

The scheme's tenure will have a rollout option in multiples of one year and like a fixed deposit, breaking of lock-in period will be allowed. "To incentivise banks, it is proposed that they may be permitted to deposit the mobilised gold as part of their CRR/SLR requirements with RBI. This aspect is still under examination," the draft says. Cash reserve ratio (CRR) and statutory liquidity ratio (SLR) are mandatory requirements which banks have to follow in accordance with RBI rules. The SLR is the minimum amount of bonds that banks must have, while the CRR is the share of deposits they have to compulsory keep with the apex bank. Banks may sell the mobilised gold to generate foreign money, which can be used for onward lending to exporters or importers. They can also convert the gold into coins for onward sale to customers or lend it to jewellers. The government has also planned to start work on a gold coin that will carry the Ashok Chakra on its face.
 

prst

Well-Known Member
#7
not clear about the purity of gold deposited though. Should it be 24C?
They won't preserve the ornaments rite.
 

toingpoing

Well-Known Member
#8
Any Fixed Deposit in Bank is secured only upto one lac. What is the position here??? Nobody would come forward to deposit ,without guarantee of repayment. I for one,would never trust the Government.
 

Catch22

Well-Known Member
#10
Sorry folks .Hadn't logged in .Kindly read this …An , update to the gold scheme ,DSM has been kind enough to post..

Gold monetisation scheme: Old wine in new 30 gm bottle not enough to woo idle stock


(This is further to the post on Gold Monetisation Scheme. Came across this finer details of the policy, which would be an anathema to most people who would otherwise be interested in the scheme. The hiccup? The gold would be melted!!! Now how many folks would want to see their precious mangalsutras and family jewels be melted for 1% more per annum?)

http://www.firstpost.com/business/g...tle-not-enough-to-woo-idle-stock-2253334.html

From a forbidding level, except for temples and rich persons, of 500 grams, the just released draft paper allows one to deposit gold as low as 30 grams with banks and earn interest reckoned also in gold. To wit, if a bank offers to pay 1% interest, and you have deposited 100 grams, at the end of the year, which is the minimum term for which a lot of 30 grams and more has to be deposited, your gold account would have grown to 101 grams.

There will not be any tax on the monetary value of one gram of gold earned as interest. Nor would there be any capital gains tax on the redemption amount or gold received. In other qords, if you had deposited 100 grams valued at Rs 2,500 a gram for one year at the end of which you get back the same gold valued now at Rs 2,600 a gram either in gold or in cash, the extra Rs 100 per gram will not attract capital gains tax. While exemption from capital gains tax is a continuation of the same policy, the exemption proposed on interest is new, and could be the much-needed sweetener to an extent.

Banks are free to choose the rate of interest which is good for competition and depositors. So far so good. The moot question is will the inhibitions that marred the earlier gold deposit scheme vanish. The answer sadly is in the negative. The metal would be melted as hitherto much to the dismay and chagrin of women folk, to whom melting mangal sutra for example is abshagun, inauspicious and a strict no-no. That our ladies routinely lose out to the wicked jewelers on account of wastage but are finicky about melting on sentimental grounds need not detain us.

The tax exemptions mean a lot for those in the 30% income tax bracket as it would heighten the post-tax return on investments but temples and shrines like Tirumala Tirupati Dewastanam (TTD), Shirdi Sai Baba Trust, Mata Vaishneo Devi trust etc. are in any case tax exempt. And there is no guarantee that tax sleuths will not come calling hot on deposit, asking for the source, the irritant that bedeviled the earlier schemes as well. Black money in this country finds sanctuary in real estate and gold. Gold has never come tumbling out of cupboards, lofts and lockers enticed by interest which pales before the tax consequences. It is not also clear why an account holder should state upfront at the time of deposit what he wants on redemption -- cash or gold. In all fairness, she should have been allowed this choice at the point of redemption.

There could be other avoidable troubles as well when the process is initiated. First, one has to find the nearest BIS-approved hallmark assaying center for valuation. The valuation certificate along with KYC norms fulfillment at the bank would lead to the next step -- melting. It is not clear if bank branches operating the scheme would all have melting facilities. It would have been better if assaying centres did the job of melting as well. In any case, it is heartening to note from the draft that melting will not take more than 3 to 4 hours which is a vast improvement over the huge time taken in sending jewelry and gold to smelters in Italy, France etc. earlier.

All in all old wine in new bottle except that the bottle is a more conveniently sized 30 gram container. But it is unlikely that even a minuscule part of the guessstimated 20,000 MT of gold the country has is going to come into circulation and apply the brakes on gold imports that accentuates our current account deficit. Under the extant scheme, hardly 4,000 kilograms have reportedly been mobilised, a drop in the ocean. Would higher interest engendered by competition do the trick? But banks would be skating on thin ice, with wafer thin margins which additionally depends upon the price of the yellow metal in the interregnum between deposit and redemption when they get freedom to play around with depositors’ gold.
 

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