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Make Money from your Idle Gold at Home by Suresh S., Director, DMS Financial Services P. Ltd.

Make Money from your Idle Gold at Home by Suresh S., Director, DMS Financial Services P. Ltd. Is Gold lying idle at home or in the locker – jewellery or bars or coins – and not expected to be used for some time?

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Make Money from your Idle Gold at Home by Suresh S., Director, DMS Financial Services P. Ltd.

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  1. Make Money from your Idle Gold at Homeby Suresh S., Director, DMS Financial Services P. Ltd. • Is Gold lying idle at home or in the locker – jewellery or bars or coins – and not expected to be used for some time? • Make money by depositing the gold with a bank such as SBI, in the same way you deposit cash for opening a Fixed deposit. You can deposit for any term - 6 months going up to 7 years. • You will be paid interest @ 1% per annum – tax free. • The jewellery deposited is melted by the bank and converted into gold bars. A gold deposit certificate is then issued for the weight. At the end of the term, the bank will return to you either Cash or gold bars. Expenses are to the account of the bank. • In short instead of holding Gold physically, you hold virtually. But you earn in the process. DMS Financial Services P.Ltd.

  2. You have Gold but wish to sell it? Think again. Gold is one of your most trusted friends. Price of Gold has been on a swing from 2000 onwards: Source: www.gold.org Spot Gold Price in USD in oz DMS Financial Services P.Ltd.

  3. The improvement in Gold price from 2000 is evident when contrasted with prior to 2000 periods: Source: Reuters Datastream, LBMA, World Gold Council DMS Financial Services P.Ltd.

  4. Thums up to Gold Gold attracts because not only its Returns are high but there is not much Volatility in its returns. Study covering 13 years Jan.’00 to Dec.’12– Gold returns and Volatility • Volatility is measured by Standard deviation, taken for the period on the basis of daily returns. • If you had bought Gold on 1st Jan.’00, the appreciation in price as on 31st Dec.2012 would have shown a compounded growth of 14.34% (CAGR of returns). DMS Financial Services P.Ltd.

  5. Going further, any asset to be worthwhile must generate returns more than the rate of inflation; also, an asset which is risky no matter how small the riskiness, must yield returns over the risk free returns. Gold shines very well on these counts: • Note: Public issue of HUDCO tax-free bonds (Feb.’13) compared with Gold in the above Table. DMS Financial Services P.Ltd.

  6. Demand for Gold The Returns will continue as price of Gold is expected to be maintained: • Gold will continue to lure investors as Europe is still in crisis and stock markets are very volatile. • Gold price in 2012 was 2.4 times that of 2008, yet the demand has gone up by 1.6 times during this period! • This has been leading to huge imports of Gold. Import bill for Gold is only next to Oil. Gold imports were $ 56.5 billion for the financial year 2011-12. It is expected to be higher in 2012-13. • Demand according to World Gold Council is expected to rise this year by 12% almost all of which is imported. • The Current account deficit @ 4.2% of the GDP in fiscal 11-12 was a 30-year high. This year Current account deficit is as high as 5.4% of GDP (July-Sept. Quarter). Therefore the Govt. increased the import duty on Gold from 4% to 6% on Jan.21st. This is an attempt to reduce import of Gold. DMS Financial Services P.Ltd.

  7. The Why of Gold Deposit Scheme If Gold lying idle can be brought into circulation, import of Gold can be reduced: • As per the estimate of an RBI committee 20,000 tons of gold is lying idle with the people. • Mutual Funds dealing with Gold ETFs account for 2% of the Mutual fund industry AUM The Gold deposit scheme will bring out the idle Gold and get it into circulation. To motivate individuals, Mutual funds and Corporates to deposit the Gold, the carrot being offered is interest on the Gold deposit. DMS Financial Services P.Ltd.

  8. 1% interest • If you have Gold valued at today’s prices at Rs. 20 lakhs(say 700 grams) you earn Rs.20,000 per annum as Interest. • This Interest earned is tax free. • If you are in the income tax slab of 30%, it means your pre-tax Interest (market rate) is 1.43%. • For a deposit of Rs. 20 lakhs this is Rs. 28600 or Rs. 2380 per month. DMS Financial Services P.Ltd.

  9. If you DO NOT Deposit… What is the opportunity cost of ignoring such an offer? If you had placed a Fixed deposit earning 9% interest per annum (taxable), this Rs. 28600 would have been the interest on a Principle of Rs. 318,000. That means, by ignoring such an offer you are wasting Rs.318,000 of equivalent amount of Principle! DMS Financial Services P.Ltd.

  10. Free Lunch This is a Free lunch offer. Plus, there is no risk, all expenses are on the house, your Deposit is liquid. When you get the gold bars back, convert it back into jewels based on the then prevailing latest design. Yes, the expenses of ‘making’ into jewels will be to your account. To that extent, this scheme is more suited if you hold Gold as bars or coins and not Jewels. Or, if you plan to anyway re-design the existing jewels. Life can sure be ‘interest’ing. DMS Financial Services P.Ltd.

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