Given the market scenario where gold prices have scaled to an all-time high, would it still be wise on your part to look at the precious yellow metal as a lucrative investment option?
Yes, say analysts. Gold - even at the current high levels - is still a good buy. At present, the metal, the first choice of all Indian jewellery-addicts, is quoting at around Rs 7,300 per 10 grams, showing an appreciation of more than Rs 1,000 in just over a month.
The prices are expected to climb up even further, led by a rise in physical demand for the yellow metal in India, China and West Asia. And the demand is poised to gather momentum, which, in turn, will fuel the prices.
Then, what are the implications from the perspective of the investors' community: even if you buy gold now at these "exorbitant" levels, you are not going to lose; the precious metal has more steam left in it to get you higher returns in the coming months.
The advantage that gold has over many other options is that the metal is accepted by all segments of consumers as a good investment avenue. It has the flexibility: as and when the prices move up, the gold coins can be encashed or converted into loans.
Even as gold prices are reaching newer peaks, banks are betting big on the retail gold business. State Bank of India and ICICI Bank have been in the business for more than a year now, while players like Corporation Bank, HDFC Bank and IndusInd Bank are new entrants to the party. All these banks are jostling for a slice of the golden pie in the market.
Like other banks, HDFC Bank too sells 24 carat and 99.99 per cent purity gold. All such coins are imported from the PAMP Refinery in Switzerland. However, unlike others, HDFC Bank does not sell gold in coin shapes. The bank's 5-gram gold product is available in bars.
IndusInd Bank, too, has launched similar coins, which come in the 5-10 gm range with fineness of 99.9 per cent. A customer can pick up the coins by paying cash of up to Rs 50,000 at one time. The larger 50-gm size is for the high networth individual. More than 50 branches of the bank have been designated as sellers of such gold coins.
However, Corporation Bank was the first public sector bank to import gold in India following the Reserve Bank of India sanction in 1997. And there are many banks, which are waiting in the wings with similar products lined up.
The RBI has now ensured that customers have the choice of buying these coins from either banks or traditional retail gold outlets - like Zaveri Bazaar in Mumbai.
With most banks' festival offers still on, buying gold from banks continues to be a profitable investment decision. ICICI Bank is currently selling a small gold coin weighing 2 grams for close to Rs 1,500. SBI is also selling at around the same rate. Normally, purchase of gold coins from banks is at a price 5-10 per cent higher than the wholesale price.
Banks, unlike retail gold outlets, follow the global practice of offering customers proper assaying certificates and hallmarking. They give purity certification, which ensures the quality of the metal. Though big retail shops often provide the same details on request, many jewellery shops do not follow such a practice.
However, on the negative side, Banks do not buy back the gold coins they sell - considered a big hurdle in gold coins from becoming highly popular. But banks are planning to rectify this.
