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Saving & Investing into Gold - Series 3 - How to Invest into Anything?

Saving & Investing into Gold - Series 3 - How to Invest into Anything?

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Published by Anil Selarka
This is continuation of previous article (Series 2) of How to Invest into anything? The previous article was preparatory whereas this issue deals with specifics. Often we see in the investment world is not true. This is why many predictions of experts and pundits go wrong. The art of investment is similar to "Art of War" where an Investor is a soldier. He has to deal with the situation as it comes. No planning helps,whereas some core understanding does guide the soldier, that is, an investor. This article is more directed at the individual investor who is relatively less equipped to deal with complex products such as ETF, futures, options, derivatives, leverages etc. The author's emphasis is to let the investor make the most money through discipline and simple understanding. An individual does not have delve into complexities when he can as well make same or even better amount of money by following simple strategy. This is why Author reminded his father's wisdom - "When one needs to use common sense, he should not waste his intelligence. It can be put to better use later on. Read more.....
This is continuation of previous article (Series 2) of How to Invest into anything? The previous article was preparatory whereas this issue deals with specifics. Often we see in the investment world is not true. This is why many predictions of experts and pundits go wrong. The art of investment is similar to "Art of War" where an Investor is a soldier. He has to deal with the situation as it comes. No planning helps,whereas some core understanding does guide the soldier, that is, an investor. This article is more directed at the individual investor who is relatively less equipped to deal with complex products such as ETF, futures, options, derivatives, leverages etc. The author's emphasis is to let the investor make the most money through discipline and simple understanding. An individual does not have delve into complexities when he can as well make same or even better amount of money by following simple strategy. This is why Author reminded his father's wisdom - "When one needs to use common sense, he should not waste his intelligence. It can be put to better use later on. Read more.....

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Published by: Anil Selarka on Aug 16, 2009
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 Ref: 0908-030A of 16.08.2008In this part, we will discuss how to buy physical gold – form, buying source, timing, management and ultimate sale. It also depends on the physical location of the buyer. Some currency issues arealso involved.Having already discussed “why to buy gold” in Series-2, we focus on the subsequent subjects:WHAT FORM TO BUY PHYSICAL GOLD?1.
 
For Long Term Savings & Investment a.
 
I expect tremendous price rise in gold and silver (of late, silver is fast riser thangold). The reason as mentioned by me in Series-2, that United States has virtuallylost gold up to minimum 6297 tons of gold. Although it holds the gold physically, thetrue ownership lies elsewhere (most possibly in Europe and Switzerland)b.
 
When any investment rises 100% to 200%, there is no need to invest on longerterms. When the gold rises, as I expect, one must sell it in the rally. When worldeconomy recovers, and gold prices begin to consolidate at upper level, it will be timeto sale and use the proceeds for property and other assets.2.
 
Price increase in USD an other currenciesa.
 
Gold will rise most in USD. That is, other world currencies such as Japanese Yen,Swiss Francs, will rise more than others. The investment gain in terms of localcurrency such as above and also Euro, GBP, Rupee will be less to the extent thecurrency has risen. That is, if the gold rises by 200% and currency rises by 20%,then the gain in those currencies will be adjusted downward due to currency gain.For example:
Gold Price Yen/USD INR/USDNow $950 95 48Say, 2010 $2,450 81 45Gain in % in local currency 158% 120% 142%
 
 b.
 
If you are living in country with pegged currency, like Hong Kong, the gain willalmost same as USD. Or may be 0.5% t 1% smaller up to the movement allowedwithin the bandwidth for currency mechanism. (In Hong Kong, they allow 0.5% to1% maximum)3.
 
Buying Physical Gold in USA: There are many counters, but the best isAPMEXandMONEX. They have no hidden commission, the mark up is smaller and delivery is fast. APMEXdelivers only within United States. They do not store it.MONEXdoes.4.
 
Buying Physical Gold in Hong Kong: Bank of China, Hong Kong sells gold (0.9999) withbank’s marking in 1 to 5 tael bars (1 Tael = 37.5 gms appx). Mark up is about 1%. They alsosell Paper Gold (called gold by pass book). One can also buy Gold from reputed gold dealersin tael form from say such as Wing On paying just 1% to 2% mark up. The licensed goldshops are generally safe in Hong Kong. However, be careful of the shops who sell imitationjewellery along with gold. Check out their licenses. Gold usually bear 0.9999 stampHong Kong is also unique in selling 24K gold jewellary which is cheaper than centers likeIndia. The making charge is fixed (not per gram as in India) per article. I once paid only HK$150 for gold chain for myself weighing 50 grams or just HK$ 3 or Rs 18 per gram comparedto what you pay @ Rs 100 to Rs 120 per gram in India.Yes, in Hong Kong, they do quote ornamental gold prices separately which is usually higherby 3% to 4%. They may also charge 2% commission which, if one negotiates, will not becharged.I once tried to sell HK made 24K ornament in India. The Ghatkopar dealer paid me fullvalue instantly in cash. The gold dealer also need 24K gold from reliable source.5.
 
Buying Physical Gold in UK/Europe: throughGoldMoney. They buy for you and also deliverin many countries in Europe and others. Check out their list. Mark up is 1.25% to 2% at themost. Further, there is no charge when selling; so the cost of buying and selling is halved. If required, they provide storage facility at London and Europe at little cost. The gold isphysically held on your behalf at the storage centers.a.
 
Buying Gold in India: There are two issues here. Buying gold bars and goldornaments:i.
 
Private and Nationalized Banks: They make only one way market, and chargealmost 10% higher than the international market. This is acceptable, becausethe price also include 2% import duty and 2% sales tax. This is 0.999 finegold, not 0.9999. Not much difference (price difference just 1%)ii.
 
Buying fromMMTC: One can buy from their own or franchised retail shops.They sell medallions with 0.999 fineness. (see the picture on the title). Theyalso make only one way market. The mark up is nearly 11%. They will not buy back from you. You end up losing 8% in real terms, but when your gaincould be 150% (as I expect, but that is only opinion), who cares for 8%?iii.
 
Buying from large Gold/bullion dealers: One may buy gold bars or lagdisfrom gold dealers at cheaper than bank prices. However, do take the invoiceeven if one has to pay 2% sales tax. The reason is Tax department usuallyequate the raw gold investment as evidence of “black money” though they donot bother about investment up to Rs 5 to 10 Lakhs now. If it is “ornamental”gold, it is known as “Stree dhan” or “Woman’s Wealth” which is usuallyuntouchable.

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