[PrideRed]

While most are aware, posting here for reference.

22K gold coin which probably is the one with cheapest making charge, you are paying 700Rs/g as making/wastage(todays 22K gold price is ~7500).



The catch is when you sell this coin you get paid only for 9grams as remaining 1gram isn't gold. So if you are to sell this coin today, max you can get is 9x8200=74000(approx). So for one to make profit, gold price has to increase by about 20-25%!

Bottomline, if you looking to make short term profit with physical gold- Avoid!

[It's Magic]

Originally Posted by hrman

Gold is seen as a safe haven and is an expense in my opinion. Elderly folks, namely people of my parents generation never sell gold. It is supposed to be sold only during dire times, still the craze with everything Gold.

I have similar thoughts. Most people invest in gold because it provides good returns and can be useful when you need money. But how many people actually sell this purchased gold in their lifetime?

My observation is that most people just keep storing gold, thinking they can quickly raise money in case of need. However, when they actually need money, selling gold is the last thing on their mind.

So, in my opinion, you are essentially purchasing gold for the next generation, not for yourself. I am not denying that gold is a good investment and gives good returns, but I think you should invest in it moderately.

[Naetik30]

Originally Posted by PrideRed

Bottomline, if you looking to make short term profit with physical gold- Avoid!

If you are into credit card game and hold some good ones, you can easily make up some good value. But that is not for this thread.

[GoBabyGo]

Originally Posted by vaibhav_a_a

From where have you gleaned this gem of a factoid

Hi vaibhav_a_a - I meant the Income Tax Act section & sub section details mentioned in this video

https://youtu.be/fs-H6BzkIbU?si=gPHUbmyWKc0cRdPb

[Taxman]

Originally Posted by PrideRed

Sorry, you are right, wealth tax was abolished and there is no specific rules re-introduced for gold except for the limit aspect where one can hold upto certain limit of gold per individual and beyond which can be fined.

There is no limit on the quantity of gold a person can possess provided that the individual can prove the source of inheritance/investment.

The limit you have mentioned pertains to the amount of gold that an officer cannot confiscate irrespective of whether source of investment can be proven or not.

The limits are as follows:
1) 100 grams per male.
2) 250 grams per unmarried female.
3) 500 grams per married female.

[Gsynch]

Originally Posted by Taxman

3) 500 grams per married male.

It should be 500 grams per married FEMALE

[vaibhav_a_a]

Originally Posted by GoBabyGo

Hi vaibhav_a_a - I meant the Income Tax Act section & sub section details mentioned in this video

https://Youtu.be/fs-H6BzkIbU?si=gPHUbmyWKc0cRdPb

Thanks. This is a unique and specific example which is a borderline loophole (considering old silver utensils sales under the same head as sale of household items).

Assume you'd like to go down this route. Here're a few reasons how you're losing value.

1. Making charges on silver utensils result in poor value. Today's IBJA rate for 999 silver is approx 90K INR / KG and the cast bar (used for investments, usually) are priced around 99K. Taking a silver bowl from Senco as example: https://sencogoldanddiamonds.com/jew...hoCygcQAvD_BwE. The value of equivalent purity silver works out to INR127 K INR/KG (excluding GST)

2. If we do physical investment, utensils, due to making charges, work out to be 30% more expensive at input.

3. If we compare with digital silver, you'd pay GST but on RSBL Goldella, the price for 1KG digital, exclusive GST is 92.5K INR/Kg So this is still higher than pure rate but cheaper than physical.

4. Cheapest would be ETFs of course but I have posted about those earlier on the gold thread.

5. For a reasonable investment, over several years, you'd end up with several KGs of silver. In physical form, bars are the most space efficient - utensils mentioned by the person in video are actually the most cumbersome. If one doesn't want to take a risk and ends up storing them in a bank locker, imagine the charges over a decade for 10Kg of silver utensils due to volume. Of course you may take a risk and keep them at home.

6. Lastly, physical suffers from lower realization as for forms other than hallmarked 999 bars, the purchaser may insist on testing or worse (for say jewelry or utensils) melting the bullion.

7. In the video the person mentioned about court cases. I cannot assess or factor in the cost of litigation nor am I interested in an avenue that is so tentative so as to even potentially involve litigation.

[DigitalOne]

I would advise adequate caution to any asset that has gone up/down considerably in short period of time. You may fall into the trap of Recency Bias.

Recency bias is a cognitive phenomenon that affects our perception and decision-making processes, particularly in the realm of finance. It refers to the tendency to weigh recent events more heavily than earlier events when making decisions or predictions about the future. This bias can lead individuals to overemphasize short-term performance and recent outcomes, often at the expense of long-term objectives and historical data.

Let me elaborate on these points. Look at this chart below (same chart as what @Smartcat has posted in post#9 of this thread. He helped me generate this in the TradingView site today. Thanks!!). Chart shows 22k-Gold spot prices in India from 1973-2025.



Over the long term of 52 years, it has indeed given a CAGR of 11.5% as @Smartcat has written in his post. But the devil lies in the details. Look at the trend between 1993 to 2001. Gold Prices hit Rs 400 around April 1993.



The price in November 2001 was the same. It was bound in the range of 400 to 430 for 8+ years. Zero gains for 8+ long years!!



1993 - 2001 may be ancient history for some . So let's look at a more recent period. Gold hit Rs 3000 for the first time in Aug 2012.



It again hit the same mark only in Jan 2019. For 6 and half years, it gave zero or negative returns !!




Gold as an asset is no different from any other financial asset. So, it has to be evaluated on the same parameters as you would do to any other financial asset, for example, a Mutual fund.

Which brings me to the concept of Rolling returns.

What are Rolling Returns in Mutual Funds?
Rolling return is a method used to assess the average annual return of a mutual fund over various periods within a larger investment horizon. Unlike traditional returns, which rely on specific start and end dates, rolling returns offer a continuous, overlapping view of the fund's performance.

It examines the fund’s performance across different holding periods, such as one year, three years, five years, or any chosen timeframe. This approach allows you to gauge the fund's consistency under different market conditions.

Replace the word 'fund' with 'Gold' and the concept remains the same. For example, if you want to calculate Gold's 3-year rolling return between 2014 and 2025, you see the price difference between 1-Jan-2014 and 1-Jan-2017, next 2-Jan-2014 and 2-Jan-2017, and so on. The end result of a Rolling return calculation is a set of percentages, which I will explain below.

Since I could not get rolling returns of spot gold prices, I took the next best alternative - HDFC Gold ETF (which tracks spot gold prices). Below is the 3-year rolling returns from Aug-2015 (inception date of the fund) to Jan-2025.




How to interpret this data? Suppose you buy 1 gold (or 1 unit of HDFC Gold ETF) on 1-Aug-2015 and sell the same 1g/unit on 1-Aug-2018. You keep buying each day and sell 1g/unit on the same date 3 years later. What is bought on 30-Jan-2022 is sold on 30-Jan-2025. Aug-2015 to Jan-2022 is 6.5 years so there would be around 2400 buy transactions (6.5 years * 365 days).

What this table above shows is in 20% of all your transactions, you would have got negative returns i.e. the selling price was lower than what you bought 3 years previous. In 31% of the cases, it was just up by 0-5%. That is, in 50% of the cases you have got less than inflation returns !!. Your chance of beating inflation is just 50%.

In short, neither is gold a guaranteed hedge against inflation, nor is it a guaranteed safe haven - there are significant chances of negative or low returns. Be cautious in following 'trends' while making investment decisions.

[Fuldagap]

Originally Posted by DigitalOne

In short, neither is gold a guaranteed hedge against inflation, nor is it a guaranteed safe haven - there are significant chances of negative or low returns. Be cautious in following 'trends' while making investment decisions.

What a fantastic analysis!

I can now share this post with friends who just wont listen about gold investment.

[wheelspinner]

Gold is the most stable asset class. Buy digital gold every month in SIPs, or invest in SGBs.

[onco.opinion]

Every investment entails risks and periods of no return or negative return. If everything is assessed at such minute level, then probably it will become impossible to make an assessment. Our grandparents and great grandparents did not know such technicalities and made the investments based on the societal norms in instruments which were popular in their times. I feel they did the right thing and achieved acceptable results. Digging deep into anything just brings up muck, which may not be relevant to everyone.

For a perspective, if any life saving treatment is dug up beyond a limit, the information will be scary to such an extent that people will refuse to undergo that treatment.

[Kapany]

Originally Posted by onco.opinion

Digging deep into anything just brings up muck, which may not be relevant to everyone.

The post (by @DigitalOne) you are replying to has done a fine job in their analysis. If you don’t have valid data to counter it, at least for the sanctity of discussion in the forum refrain from such a superficial and superfluous take.

[avchrono]

Originally Posted by DigitalOne

In short, neither is gold a guaranteed hedge against inflation, nor is it a guaranteed safe haven - there are significant chances of negative or low returns. Be cautious in following 'trends' while making investment decisions.

Could you maybe do this rolling returns exercise for a 5 years rolling return window? An investment in equity MF is suggested to be 5 years approx. to overcome volatility and reduce risk substantially. Given that Gold is used as Hedge for inflation and diversify investments, we can compare with a 5 year rolling return. Of-course people hold Gold for generations, and if you go into that, it would be 10x multiplier (not 2x or 5x) over those timelines.

[vijaykr]

End of the day, I believe our money deserves more respect than just blindly following the herd mentality or adopting a philosophy of my ancestors did it and I will too. There's no guarantee that what worked in the past will work now.

Granted it's a pain to spend the time and effort required to understand the in-depth analysis done by someone else (@digitalone in this case), but if we don't take care of our money who will?

But then, there is no one right way and to reach his own, I guess...

I too have invested a smallish portion in Gold via SGBs, but given the continued rise and new SGB issues are not likely any more, I feel I should've put in more. In fact it might have been better for me to have held on to the Gold MFA instead of selling it in the post Covid really, but for a good appreciation then.

The current prices are too high for me to consider making fresh investments into gold though.

[Thyag]

Markets are cyclical, so are the sectors and so are the instruments in them. People who have made the rotation properly have always made more money than people who follow invest and forget principle. Example - Check the gold price from 2013 to 2018, do you think it would have been wise to keep invested in it for 5 years ?

Its all based on your interest in making money by regularly analysing the current market and trend, you can pay premium amount and get advice, still it is an opinion of a third person or an entity. Before investing in the market, invest in yourself by learning about them and you will fare very well than the most money managers