Should you buy that block of yellow metal now? Well, it is one of the best investment options available at this juncture.
The fact that market movers expect bullion prices to firm up in the forthcoming months, this is the best time to buy gold, as it provides a natural hedge against inflation and currency depreciation. “In order to balance your investment portfolio, marginal investment in gold is essential,” bullion dealers feel.
The fact that inflation is expected to touch 7% makes it an attractive investment avenue. In the last two days, the price of standard gold and 22 carat gold have eased further by Rs 10 and Rs 5 to Rs 4,365 and Rs 4,040 per 10 gram.
According to M L Damani, ex-president, Bombay Bullion Association, “the demand for gold has not moved up in the last one year. The demand is likely to firm up only if the European banks stop selling gold. I find bonds a better investment option compared to bullion.”
Right now the best strategy would be to buy gold and block it in the gold deposit scheme of the banks which offer anywhere between 3 per cent to 4 per cent for varying maturity profile. “Gold deposit scheme floated by banks provide investors hedge against inflation, offers a fixed return on their gold deposit and provide investors instant liquidity by way of loan against gold deposit offered at one per cent over the prime lending rate,” said an official from a nationalized bank.
State Bank of India (SBI) has so far managed to mop up over 4,000 kilos of gold through its gold deposit scheme since its launch (five months ago). Last November, the scheme was launched by SBI with lot of hype and hoopla.
So far only two banks have launched their gold deposit scheme---State Bank of India (SBI) and Corporation Bank. Allahabad Bank, Canara Bank and Bank of Baroda (BoB) are in the process of launching the deposit scheme.
The gold bond scheme offered by these banks is a transferable, open ended, fixed deposit scheme, which also offers rupee loans to deposit holders. For a maturity period of three years, the banks are offering an interest rate of 3 per cent, 3.25 per cent for a maturity period of four years, 3.5 per cent for five years, 3.75 per cent for six years and 4 per cent for seven year. The scheme also offers premature withdrawal facility to deposit holders. The scheme is transferable by endorsement and delivery and offers repayment in the form of cash or gold.