Financial Daily from THE HINDU group of publications
Friday, Aug 13, 2004
Gold & Silver
Industry & Economy - Investments
Gold a safer bet than equities, bonds: WGC
New Delhi , Aug. 12
IT is well known that Indians love the yellow metal and are the world's largest consumers of gold. But did you know that one ounce of gold would consistently purchase the same amount of goods and services today as it would have done 400 years ago?
According to the World Gold Council, investing in the yellow metal is safer than traditional investments in equities and bonds since gold is negatively correlated to these investment options.
Which means when the stock market crashes or when the dollar weakens, gold continues to be a safe haven for investors because gold prices actually rise in such instances!
Realising the potential of promoting gold as a safe investment option for Indians - a nation which already buys Rs 40,000 crore worth of the metal every year in the form of jewellery and investments - WGC has made several suggestions to the Government in the matter.
These include allowing banks to offer gold-backed investment products and gold loans to local jewellers.
"Indians already buy over Rs 5,000 crore of gold as bars and coins, all outside the regulated banking sector.
"Housewives save over Rs 4,000 crore every year in recurring deposits to buy gold jewellery, again outside the banking sector. By allowing banks to offer gold-backed investment products, we will offer risk-free savings at increased convenience and lower cost," said WGC Managing Director Mr Sanjeev Agarwal.
Also, the council has suggested lowering of customs duty on gold imports. WGC has said that India can well become the Regional Gold Trading Hub provided the Futures Exchange was allowed to trade in the spot market; banks and financial institutions actively participate in the gold market and bullion exports are permitted.
Across the world, several investment options are available for investors to put their money in the yellow metal.
For example, Gold Savings Accounts operate like regular bank accounts where the customer's account is credited with balances in gold and withdrawals can be either in the form of gold coins or currency equivalents.
Then, another option is a Gold Accumulation Plan.
This is a recurring deposit scheme where a monthly debit from the customer's savings account is backed by 100 per cent physical gold. Also, there are gold chits being run by jewellers where at the end of the year, housewives can buy gold jewellery or coins from the same jeweller worth the total money they have paid in instalments.
Gold is listed as a share on the London Stock Exchange and the Australian Stock Exchange.
If WGC's efforts bear fruit, there could be a `golden' share at our very own BSE in the future!
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