Akshaya Tritiya 2020: Here's how you can buy gold online during coronavirus enforced lockdown
High gold prices, logistical constraints on delivery, uncertainties surrounding wedding schedules, income anxieties and lockdown in various degrees make it an unusual period that is bound to seriously restrict gold demand.
It is Akshaya Tritiya today. Many consider it to be an auspicious occasion to purchase gold today. There are some consumers who buy gold for investment reasons as well as it is a safe-haven against inflation and currency fluctuation.
Gold is still trading above Rs 46,500 levels. On Friday (24 April), gold futures were up 0.17 percent or Rs 78 to Rs 46,505 per 10 grams. In the previous two sessions, gold prices had rallied about Rs 1,300 per 10 gram. On the Multi Commodity Exchange, gold contracts for June traded higher by Rs 315, or 0.68 percent, at Rs 46,742 per 10 grams in a turnover of 16,400 lots.
High gold prices, logistical constraints on delivery, uncertainties surrounding wedding schedules, income anxieties and lockdown in various degrees make it an unusual period that is bound to seriously restrict gold demand, said Somasundaram PR, Managing Director, India, World Council.
"Digital platforms like SafeGold and MMTC-PAMP could facilitate customary token purchases in urban areas and support the tradition but they are unlikely yet to be a significant alternative to “brick and mortar” sales - as they sell allocated gold and their supplies too are limited. Large retailers could adopt some innovative ideas to promote online trade with digitally savvy HNIs," Somasundaram said.
Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services, said, there may be subdued demand in gold this Akshaya Tritiya. However, the economic uncertainty and recessionary impact of Coronavirus in global economy will push the overall gold prices higher, he said. "Technically, intermediate corrections will be seen on gold but the trend will remain positive until prices trade above 44000 in the domestic markets. Expect prices to test 47300/48550 levels until then. Also, we may see a surge in SPDR holdings. Holdings in SPDR Gold Trust, the world's largest gold backed ETF stood at 1042.46 tonnes as of 22nd April 2020 which is a surge of almost 8% in April alone. On year to date basis, it rallied around 16.7 percent from 893.25 tonnes on 31st December 2019," Gupta said.
Customers can choose from a slew of digital gold options--gold ownership certificate, gold ETFs and sovereign gold bonds.
Gold Exchange Traded Funds, or Gold ETFs are open-ended mutual fund schemes based on the ever-fluctuating cost of gold. The physical gold, on the other hand, does not generate an income. Also, the making charges on physical gold is high, said Archit Gupta, Founder and CEO, ClearTax.
Gold ETFs give investors exposure to the gold market. Gupta says: "They are an excellent choice of investment for investors looking to beat inflation in the long-run. Moreover, gold as an asset is less volatile when compared to equities. One Gold ETF unit is equal to 1 gram gold. So, it gives you the dual benefit of stock trading as well as gold investments. Some fund houses capitalise on gold bullion, and hence, they need to keep a close watch on the market performance. The value of Gold ETFs increases/decreases proportionally with the price of physical gold. Not only do they not compromise on purity but also promise a uniform availability across the country," Gupta said.
Pankaj Bobade, Head - Fundamental research, Axis Securities said, "Gold is a hedge against uncertainty and a good investment vehicle, especially in the current scenario. With the COVID-19 pandemic bringing the world economy to a standstill and a possible contraction ahead, gold seems an attractive option. Moreover, as the Central Banks of developed nations have been on easing spree to fight the economic contraction, the fiat currencies are expected to face pressure in the near future. In such a scenario, gold is likely to emerge as a safe-haven asset.
"One should have a part of the portfolio invested in Gold ETF as an insurance against the possible volatilities expected in the global financial market. So, if this Akshay Trithia you are looking to buy gold, Gold ETF would be a good option from a long-term perspective," Bobade said.
How to invest in Gold ETFs
Open a Demat account and a trading account online by submitting PAN, ID proof, and residential proof
Select a Gold ETF and order one. There is also an option to choose mutual funds with an underlying gold ETF
You get a confirmation sent to your email and your phone
A nominal amount for brokerage will be deducted during the transaction
Gold ETF investors can use the stock exchange platform – National Stock Exchange (NSE) – to keep transactions and trade transparently.The asset management company (AMC) is responsible for trading them on a stock exchange. Meaning, you can enter/exit whenever required. Even in the Demat format, gold ETFs behave the same as physical gold.
Gold ETFs offer high liquidity as they can be traded in the stock exchange during a trading session at the prevailing price. Also, the transactional expenses (broker fee and govt duty) is less than that of physical gold. Approaching a retailer will need a large amount of money to purchase gold. However, in the case of gold ETFs, you have the advantage to decide the quantum you wish to buy and sell, Gupta said.
Gold ETFs offer a tax-friendly means to hold gold as the returns generated from Gold ETFs are subject to long-term capital gains tax. However, there will be no additional burden of sales tax, VAT, or wealth tax.
Sovereign Gold Bonds
The Government of India introduced the Sovereign Gold Bond (SGB) Scheme in November 2015 to offer investors an alternative to own gold. Also, it belongs to the debt fund category. Over the years, the market has witnessed a considerable decline in the demand for physical gold. SGB not only tracks the import-export value of the asset but also ensures transparency at the same time.
SGBs are government securities and are considered safe. Their value is denominated in multiples of gold grams. SGBs has witnessed a significant increase in investors, with it being considered a substitute for physical gold, said Gupta.
If you are looking to purchase an SGB, all you have to do is approach a SEBI authorised agent. Once you have redeemed the bond, the corpus (as per the current market value) will be deposited to your registered bank account.
Advantages of Sovereign Gold Bonds
Sovereign Gold Bonds carry none of the risks that are associated with physical gold, except the market risks. There is no hefty designing charge or TDS here. Therefore, nobody can steal it or change its ownership. You can earn a guaranteed annual interest at the rate of 2.50 percent (on the issue price), this is the most recent fixed rate.
If you transfer your bond before maturity, then you can get indexation benefits. There is also a sovereign guarantee on the redemption money as well as on the interest earned.
You can trade gold sovereign bonds on stock exchanges within a specific date (at the discretion of the issuer). For instance, after completing five years of investment, you can trade them on the National Stock Exchange or Bombay Stock Exchange, among others.
Some banks accept SGB as collateral/security against secured loans. Hence, they will treat it as a gold loan after setting the loan-to-value (LTV) ratio to the value of gold. The India Bullion and Jewellers Association Limited determines this.
Gold ownership certificates
Kalyan Jewellers has offering of from two grams upwards following which a gold ownership certificate would be sent to them on the day of Akshaya Tritiya based on the customer recommended platforms.
The Gold Ownership Certificate would indicate the person owns the yellow metal with a certain amount of value fulfilling the tradition of purchasing gold on Akshaya Tritiya day, they said.
"This is the first time in decades we are in a state of lockdown during the Akshaya Tritiya period. This time around, owing to the lock-down, our social media channels are flooded with queries on purchase of gold," Kalyan Jewellers, CMD, T S Kalyanaraman said.
Fintech firms Paytm and PhonePe have started selling 24 carat physical and digital gold. The two companies have partnered with Metals and Minerals Trading Corporation of India (MMTC) and SA Produits Artistiques Métaux Précieux (PAMP).
The rate of the yellow metal changes daily due to factors like state taxes, making charges, and excise duty. Check the gold and silver rate for 28 November here
The Multi Commodity Exchange figures reveal that gold futures that are set to mature on 3 February 2023, rose 0.16 percent to Rs 53,070.00. Silver futures, which will mature on 3 March next year, also climbed 0.21 percent to Rs 62,970.00
Revised Multi Commodity Exchange (MCX) data reveals that gold futures, set to mature on 5 December 2022, dropped 0.11 percent to Rs 52,529.00. Silver futures, which will also mature on 5 December, slipped 0.67 percent to Rs 60,466.00.