30 Oct 2008

Gold - a safe investment option??

Gold for once again seems to be the best and safest option for investment. Like a good fren told me, we should embark out surplus money in Gold. He told me that Gold is an option for Millionaires who wish to turn their Black money into white, i doubt! The Standard gold rose by Rs 320 at Rs 12,570 per ten gram during the Diwali festival.

I am not yet surprised at this rate. This year also, like last year.. the highest ROI was gold on the top. With recession going on, many countries are also taking up measures to fight the evil. I do believe that gold price will come down in few months time and rise. I dont know the relation between stocks and the price of gold but a good fren had told me that they are inversely proportional, how far it is true i dont know. Lets wait and watch. We had a small rift between us.. on buying gold and the source of money.

Let me put it in the form of a riddle. There can be two options of going for either one of the following.
1) Would you skip your annual investment to save tax of Rs 1 lac and instead invest in Gold?
2) Would you put your surplus amount in gold?

Lets go through the calculations now...
Option 1: At the current rate of 12,57 per gram, we will have 79 gram of Gold.
Now lets face the penalty of 30,000 as income tax for not showing 1 lac in annual investments.
So your amount you need to have is 130000 (1lac+30k for penalty)
Now the question is if you can afford that in a years time! Investin in gold has to be long term so you can skip the next year and avoid the penalty also. But you can see the gold price grow in 1 years time for sure. Say the prise rose to 1800 per gram, you will be having 142200 . Isnt that a great investment?? The only dependency is the fluctuating market and the price of the gold to rise at the end of the year. From a second viewpoint, lets put this way..
You invest 1lac at the rate of 1357 per gram
If you wish to reap 1.4 lacs the gold rate should be = 1257/1 lac *1.4 = 1759.4 /gram

Option 2: You can invest 5k every month and buy 10 gram in 3 months time (5000*3=15000). At this rate you will have 40 grams in a years time. The value will have at the end of year at the mentioned rate above, you wil have 72000 .

I will suggest option one here. You can expect gold rate to rise by at least 250 per gram in a quater (3 months time). So in a years time, the above rate is not impossible but risky. Confusing is it? Well i am sure, you are. If you aren't confused, what is the use of my post here :)
Arouse curiosity and make you think over it again and again is what i want. Do reply when you can make out and which option you will go for if the rates increases as mentioned here. :)
Till then keep reading... and happy investing.

Image Courtesy: Economic Times Epaper


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