My views published on "Investing in gold" in Economic Times article "Is it a must to have gold in your portfolio"

My views published on "Investing in gold" in Economic Times article "Is it a must to have gold in your portfolio"

https://m.economictimes.com/mf/analysis/is-it-a-must-to-have-gold-in-your-portfolio/articleshow/77277391.cms

Future of GOLD is glittering???

Just thought of sharing some interesting facts about gold today.

There is roughly 7000 years (beginning of civilization) of history of gold.

We all seek permanency and gold comes near to that.

Gold does not get corroded or rusted. It is not soluble in any acid. It is very difficult to demolish.

Most of the gold digged from time immemorial is still in circulation.

So we may even be using the some of the gold (recycled) that was used in the times of Rama, Krishna, Buddha and Jesus.

It is very soft that you can beat the gold down so thin that sunrays can shine through it.

The quantity of steel poured in an hour in our planet is more than what has been poured for gold since the civilization. That is how limited the availability of the gold is.

It is estimated that total gold available (in circulation and storage) in the world is 1,65,000 tonnes.

1 tonne is 1000 Kgs. At Rs.3000/- a gram, the cost of 1kg of gold is Rs.30 lakhs. So 1 tonne of gold is worth Rs.300 crore.

Indians privately own anywhere between 15,000 to 20,000 tonnes of gold. Even pegging it at 15,000 tonnes, the value comes above Rs.45 lakhs crore.

Since I cannot not talk about equity, the entire fund management industry in the country only manages Rs.6 lakh crore worth of equity assets.

Indian government owns only around 550 tonnes of gold.

No one knows how much gold the Indian temples have.

Tirupathi is estimated to have gold worth Rs.90,000 crores. Around 4000 kgs of gold is offered annually by his devotees to Lord Balaji. Interestingly as per legend, Balaji borrowed from Kubera 1.14 crore coins of gold for his marriage. Marriages have always been expensive in this country. By any standard, Balaji’s wedding with Padmavathi is the most expensive marriage that has ever happened so far in our world.

Till few years ago, we never knew Lord Padmanabha is so rich. Is that why he is very relaxed (ananda sayanam)? The very conservative estimate suggests that the value of gold in his abode is around Rs.4 lakh crore.

Reading various estimates and guesstimates looks like we (including deities) may have even 30,000+ tonnes of gold in our country. So we own around 20% of the entire gold in the world.

This means at today’s price, we have Rs.90 lakh crore worth of gold. India can be amazingly rich and poor at the same time.

Since gold is so malleable, just one gram of gold can be beaten into a sheet of one square metre.

The entire gold available in the world today can easily fit within a cube measuring 67 feet. Just one good shipping container would do. Golden Voyage!

75% of the gold available today has been extracted only after 1910.

The U.S.government (Fed Reserve + FortKnox) has close to 10,000 tonnes of gold.

During great depression, in 1933, U.S. government banned private holding of gold. People were ordered to handover the gold they have and were provided instead with dollars of equivalent value. Once the process was over, the government devalued the currency by over 40% eroding people’s wealth overnight. This coupled with high inflation was an extremely tough time for its citizens.

This ban was subsequently lifted only in 1975 and Americans were again allowed to own gold.

Since China has lot of dollar or dollar denominated assets; they understand the above risk better than anybody else. Chinese people were not allowed to own gold for more than 40 years and possessing gold was a severely punishable offence. Sometime during last decade this ban was removed and China has been encouraging its citizens to buy gold and silver.

Talking about silver, Buffett who rarely touches commodity, purchased 37% of the entire silver available in the world (yes, you read it right) in late nineties and sold it some time in the middle of the last decade. I think that considering the growing industrial demand and limited supply then, he saw value in purchasing the same and selling it at a very good profit. Silver was selling at abysmally low prices during the time of his purchase.

Every year, the new gold produced / recycled is consumed 50% as jewellery, 40% for investments (including ETFs) and 10% for industry. I was under the impression gold has no industrial use whatsoever till one of our client told me that electronics industry uses gold.

Though South Africa has been one of the world’s largest producers of gold, its citizens were not allowed to own gold till 2009.

For sports fan, do you know that Olympic gold medal is not made of gold! A ‘gold’ medal contains only 6 grams of gold. Only till 1912 Olympics, the gold medals were actually made of gold.

In 1991, our country’s situation was so bad that 65 tonnes of gold was taken out of the country  and mortgaged to tide over external payment crisis.

If you are worried that gold’s supply would get exhausted soon, fear not!

About 10 billion tonnes – 10,000 million tonnes (yes, you read it right) of gold is estimated to be held in the oceans of the world. An economically viable model of extraction is being explored.

Necessity is the mother of invention. If gold prices continue to rise and if the demand would only increase, who knows, a technological innovation can happen in extracting gold from ocean.

May be we can all then plan for building with our own golden bathrooms and specially bath tub so that we can have a golden bath....

What about our bappida???

My Views published in today's MINT - Ahmedabad Edition (10/11/2015)

True example of WEALTH Creation

We are optimistic about "ACCHE DIN AANE WAALE HAIN.".

If last 20 years were not good then going by above phrase next 10 years are going to be extraordinary.Last almost 20 years have been the best days an investor can wish for but the problem is we ourselves are not confident of our economy and power of Young India.

Investors confidently invest in Gold, Corporate Fixed Deposit, FD of Co-operative bank and above all real estate.But when it comes to equity they shy away from it.

Demonstrating herewith how equity mutual funds in real life can create wealth for the investors.

"Reliance Growth Fund is an Equity Diversified fund launched 19 years back wherein its NAV has moved from Rs.10 to Rs.615.59 that means investor has multiplied his money 62 times.

It is evident that there is no other asset class which can beat performance of Equity and specially investments made through Mutual fund route. Many a times investor do compare returns of equity with real estate. 

Let's see the comparison - 

If one had invested Rs.10 lacs in this fund 19 years back it would have grown to 6.2 crores that too TAX FREE and to add some other benefit is liquidity, daily valuation,transparency, diversification, part redeemable, no legal cost or hurdles, well regulated etc etc...

I leave it to the real estate investor to evaluate that how much of them can confidently claim similar returns for their real estate portfolio as a whole.

Disclaimer : Performance of fund taken only for demonstration purpose, should not be considered as our recommendation. Please consult you adviser before investing.

Undoubtedly investor should allocate funds to different assets  according to time horizon and goals.But, Investors are very comfortable with investment in FD, Gold and Real estate but when it comes to Equities every one thinks that it is a speculative asset class. History has proved that you can speculate anything for a short period, but in long term fundamental works.

Many a times the excuse given for not investing in equity is of lower risk profile, but we forget that risk profile is evaluated on 3 aspect i.e Willingness,Ability and Need. The most important aspect with most of the individuals is Need, may be they are not willing to take risk and might not have ability as well. But in today's high inflationary scenario everyone's NEED should make them a equity investor. For today's investor equity is not an option but a necessity.

So evaluate your future needs, make equity mutual funds your friend for wealth creation,but in consultation with your financial advisor.

Buy Gold at 15 to 20% Discount

Benefit of Investing through GOLD Mutual Fund against Physical purchase

The Table appended below shows benefits of Buying GOLD through Mutual fund as agst. buying trough  Jewelers or Bank. By investing in Gold through Mutual Fund you can save atleast 15 to 20% due to high prices jeweler/bank charges with same purity and additional benefits.

Gold : Is it really safe anymore???

It has been said that gold is the safest currency. That is the reason that if there is any uncertainty in any part of the world gold prices shoot up.We have always considered gold as hedge against inflation and that might be the reason that historically gold prices have moved in tandem with inflation.But in last few years it has broken all its records.

With the modern reality of gold as a speculative financial investment. Gradually, over the last two decades the tradability and liquidity of gold in a paper, financialised form has completely overtaken everything else.This is not the same gold but another speculative asset class which moves up and down depending on liquidity. 

The days are not far when we can see the deepest fall in gold prices which we Indians have never experienced in past.

In a recent article ‘Why stocks beat gold and bonds’ that Warren Buffett wrote last week briefed certain facts about gold.

Buffett explains that Gold belongs to a class of investments that will never produce anything, but whose growing value depends entirely on the belief that someone else will pay more for it eventually. The value of gold has been driven by the fear that other asset classes will lose value and this has driven up the relative value of gold. The only thing that motivates gold investors is that in the future, investors will grow more and more fearful in this manner. As more and more investors come to believe this, their increasing belief appears to confirm the truth of the belief itself for a while. Eventually, the bubble bursts at some point when the supply eventually exceeds the rate at which the belief is growing.

As Buffett points out, in gold’s case, there’s the additional problem of supply. At current prices, the world produces 168 billion US dollars of gold every year. Not just that, it is in the interest of the producers to dig up as much of the stuff as possible while prices are high and rising. The continued rise of gold would require at least that much fresh money flowing into gold investment every year. That’s a pretty large inflow that will have to be kept up if prices are to sustain. It’s true that Indians are at the forefront of the efforts to sustain this. We appear to absorb an amazing 30 per cent of fresh production every year, and thereby do huge damage to the country’s current account balance.

Back home in India the biggest problem our government of High current account deficit is also a result of our love for this asset. On the current account deficit (CAD), analysis of the current & capital accounts throws up the following: 

Gold and silver imports stood at 10.1% of commodity-wise imports in FY11, lower than only petroleum products (30.1%) and capital goods (20.3%). For FY11, India’s current account deficit stood at $44.2bn, (-2.6% of GDP), the highest in last 4 years. Gold and silver imports were $38.5bn, nearly 87% of the absolute CAD of FY11. Minus gold imports, CAD was very low at -0.4%. 

As an investor It would mere foolishness to consider that total gold assets of the world till date of $9.6 Trillion (At a price of $1750/Ounce) can replace global economy of approx.$200.00 Trillion. 

At one point in time world would agree for some alternate ways for valuing currency, and reduce dependency on Gold.

As an financial planner I feel gold can't be ignored as an investment class, but should be limited to the %age of Security or liquidity required at any given point in time plus additional requirement for child's marriage or personal consumption.