Some thoughts about how gold is/is not a good investment
Its Diwali Time and by now,you would have heard a lot about how gold prices are sky rocketing.
And to add to the frnenzy,almost all the famed banks are offering 24 karat 99.99 % pure gold coins calling gold a VALUABLE IVESTMENT.OPTION.
But there are many questions that you need to ask youreself (and if possible ask the Banks too )about how they justify gold to be an Investment option.....I wanted to know just that ...The reason was obvious...The stock market was having a bad patch and gold seemed a good alternate....I devised a mini plot for finding out gold's leverage as an investment.What I found out might help you out.These were the conclusions I made after a tedious but thorough analysis
1)The banks were true in what they said...not so fast...not about the investment option...but the purity (only)....This I say because there is no doubt that the gold bars are amazingly pure...But cost a fortune...a lot costllier than the market prices...This is where the disadvantage lies AND MORE IMPORTANTLY they dont buy back the gold that they sell....!!!!! this is the most horrrble part....Well,If we think that we can sell off somewhere,again there is a problem....THE RATES IN THE BANKS ARE A LOT HIGHER THAN THE MARKET PRICES......Double disadvantage.....So obviously,any sensible guy would conclude It is not quite a viable investment....WAIT A MINUTE...But you would (and should ) argue why not wait until prices increase and still sell for profit ????Folks,Practically,The gold prices are soaring high right now and most optimistically the prices would'nt rise significantly enough....
2)The second option is obviously jewellers.....I know the purity is less but still there are trustworthy ones...for example Tanishq primarily because it is a Tata enterprise...But What I found out what the statistics were quite bleak there too..I am not speculating...I visited the Tanishq store to find out....You would'nt beleive...(I too did'nt) when the Tanishq representative said that we could buy and sell gold at market price....I was amazed....But This is what I found out....Selling means not cash but selling the present gold bar and buying something for the same amount...It was shocking....Now I thought ...Then how was gold qouted as 'investment option' ?
See ,I have missed out a third option,pawn brokers...but I need'nt explain about that...
So,At the end I realised that it was an investment option for sure but not for the buyer but for the banks and jewellers........
By the way I have'nt yet discussed about Gold EFTs ....I would love to do that...But in anothere article.......
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