Sunday, April 22, 2012

E-Gold - Smarter way of investing in Gold

gold investment options
"E-Gold" (Electronic Gold) is a unique investment product launched by the National Spot Exchange Limited (NSEL) first time in the history of Indian commodities market. The product enables investors to invest their funds into gold in smaller denomination (1,2,3.. grams) and hold it in demat form. It is available on the pan India electronic trading platform set-up by National Spot Exchange, which can be accessed through members of NSEL or their franchises. It provided an unique opportunity to buy, accumulate, hold and liquidate E-Gold as well as to convert the same into physical gold coin or bar in a seamless manner, but initially, delivery will be made for Mumbai, Ahmadabad or Delhi locations (later NSEL intends to increase the number of centres in the future to offer physical delivery).

The transacting pattern of this product is similar to the cash segment of the equity markets, where the E-Gold bought by you will be settled on a T+2 basis (i.e. Trading day + 2 days). If you buy E-Gold today, the same will reflected (credited) in your demat account 2 days from the date of purchase. Similarly, if you have sold today, the same will reflected (debited) in your demat account 2 days from the date of sale.

However, in order to transact in E-Gold, you are required to open a demat account with any of the Depository Participants (DPs) empanelled with NSEL. And such DPs are Global Capitals, Religare, Karvy, Goldmine, IL&FS, Monarch Capital, SMC and SSD securities.

Also, this is not a futures contract as you are trading in the spot market.

  • Convenience in transacting: E-Gold provides you seamless transacting. You simply have to call your broker and place your order to transact (buy or sell) in the product, and your demat account too will reflect the transaction (buy or sell) done. You can transact during the long trading hours of NSEL, which are from 10:00 am till 11:30 pm.
  • Liquidity: E-Gold provides you, with the requisite liquidity as you can sell any number of units (subject to the existing units held by you), at anytime during the trading hours of the exchange.
  • Cost effective: E-Gold enables you to transact in gold, by incurring minimal cost (0.60 per unit per month, which is the annual maintenance cost of your demat account, plus some marginal (generally 0.50%) brokerage charged by your broker. Hence, by opting for this instrument for gold investments, you save onto the holding cost, which you otherwise pay steep while stacking physical gold in your bank locker.
  • No risk of theft: E-Gold eliminates the risk of theft of your precious yellow, as the NSEL acts as the custodian of your gold.
  • Quality: You can be rest assured that the quality of your gold will never be compromised, because as per the Securities and Exchange Board of India (SEBI) regulations, the purity of underlying gold should be 0.995 fineness and above.
e-gold directly tracks the domestic, physical gold prices and offers highest returns in comparison to Gold ETF and physical gold. However, one needs to hold eGold for 3 years to be considered a long term capital gain and taxation is 20%. Also, wealth tax is also applicable.

eGold also offers option to take physical delivery at multiple centres and option to convert it into jewellery with select and reputed jewellers. 
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  1. In my experience e-Gold is more a right investment in Gold in India. If the Gold ETFs in India, control their expense ratio within reasonable limits, then Gold etfs are also equally good. I have one site to compare various investment in Gold in India.

  2. Thanks Prakash for your comment.

  3. This comment has been removed by a blog administrator.

  4. I agree that it's really more convenient to transact over the internet. That is why I always buy gold coins online. It's more advantageous and practical.