Dhanteras is one occasion in the entire year when Bengalis feel least stingy about their money. You will find them queuing outside jewelry shops since the break of dawn to buy something or the other (in gold of course and also silver sometimes) and avail some heavy discount in making charges. This year it was no different except that I too had found a new potential in the yellow metal- the potential of being the best investment tool. I had no job then, hence no money. I had saved whatever I could from my media consulting and freelance assignments and decided to give gold a try. I wanted to start with a gold coin of the least denomination available at the banks- 2.5 grams. This would have cost me, on that day, a little more than Rs 5000.
So around mid morning I started from my house towards my most trusted bank: HDFC. I was surprised that inspite of heavily advertising the availability of gold and silver coins, there were so few people inside the bank premises and none, I gathered, were interested in buying metals. I politely asked at the counter if I could buy a gold coin.
“Of what denomination ma’am?”
“Uh, well…the least?”
“That would be Rs 12,160.”
“What! The 2.5 g costs 12,160??”
“No ma’am, we don’t have the 2.5 g. It starts from 5 g.”
“But your website said that you sell the 2.5 g as well?”
A slight pause.
Then a crooked smile.
“Yes ma’am…but not today. Infact, not in these three- four days.”
I walked to ICICI bank. It was a very warm day and I was tempted to hail a cab. But I didn’t want to spend 22 bucks for something I knew was not working in my favour. I had an inkling that it would be the same story at ICICI bank.
It was indeed! Clever! I didn’t know that even the banks were thinking like mobile service providers! Text messages would be charged double on Diwali, Christmas, New Year etc. The day when people are most likely to buy gold, we’ll sell only the costlier ones. Banks are thinking of their own profit nowadays by forcing people to buy more than their pockets would allow. But clearly, it was not working for them as I travelled to two other branches and two other banks where I didn’t find anyone looking to purchase gold coins. Was I being irrational and old fashioned then in trying to buy gold for investment? I mean, this is what our parents would have done and their parents. Was it practical to do this in this day and age? I couldn’t help but wonder: was I being conservative about my investments?
While walking back, disappointed, I saw some ruckus happening outside a popular city jewelry store- Anjali Jewelers. There were security vans guarding the area and metals detectors at every entrance. I was frisked as I entered the gates. It was dark and stuffy and I was blinded for a moment as my eyes took some time to adjust from the sunny outdoors to the dark indoors. I realized that I was in a sea of people- jostling, pushing, elbowing, screaming in various languages. The only kind of light was the glitter from the gold kept in glass cases all around. The showroom had a power cut. And what added to the distress was that almost half the city’s population was here.
As I pushed my way ahead through this Babel of sorts I noticed how cash was being handed over at the payment counter. There were notes by the thousands, lakhs even. There were women who took out wads of Rs 1000 notes from inside their blouses! There were men who looked awkward with cash- filled swollen pant pockets. There were wailing toddlers with their mothers twining gold chains around their fingers. There were young college girls emptying their wallets to covet that intricate gold pendant.
I finally managed to reach a counter which had relatively less people draped across it. I asked if they sold gold coins.
“Yes, we do. Of what denomination?”, came the gruff reply.
“Uh..well, the lowest of course…”
The man took out a little transparent plastic bag and handed it to me.
“There you go ma’am.”
“But…but…where is the coin?”
“Its right inside ma’am. 1 milligram. Can’t you see it..?”
I couldn’t even feel it being there! That invisible thing would have cost me just something around Rs 700. Affordable? Yes! Visible? No! I know it sounds crazy but I need to see what I purchase! I held up the plastic bag against the light and there it was. A tiny pinpoint of gold- a speck of dust, a dot of sunshine. Considering how I was running out of luck, I should have made the purchase. But I felt even more disappointed. I didn’t want to buy jewelry as its net worth would be minus the making charges. To top it all, the speck of gold was not even 24 carats. Jewelry shops sell 22 carats. I sighed and left the counter empty handed.
While passing the cash counter on my way back I accidentally happened to glance at a bill being processed. Someone bought jewelry worth Rs 3 lakhs after discount! Wow!
Back home, I realized that investment is actually a habit. Dhanteras is just an excuse to indulge in savings. Like Valentines Day is an excuse to show how much you love your partner/husband/wife/boyfriend/girlfriend/soulmate. Like Mother’s Day is an excuse to let your Mom know that you care and so on.
I ended up buying nothing on Dhanteras and decided to invest in gold little by little every month. Call me old- fashioned but our forefathers were right when they believed that when it came to investment, there could be nothing better than gold. After a dull period of almost 20 years, gold has suddenly emerged as one of the best investment options as their international price has risen from $ 300 an ounce to somewhere around $ 1200 an ounce.
But what form of gold should one invest in? My research has led me to these conclusions:
1. Though jewelry is the most traditional form of investing in gold, it is not a good option as this results in heavy losses in terms of making charges depending on how intricate the design is. The deduction can be anywhere between 10- 35% of the total value.
2. Bank coins, again considered to be the best option has very little liquidity as they are not bought back by the banks. Banks also charge a premium of 5- 10% on the coins.
3. World Gold Council coins are a good option. These can be bought from jewelry shops that are members of WGC. These have lesser premium and are redeemed at market price.
4. Bullion bars, though the best mode of investment, cost much higher that what an average investor can think of.
5. Gold exchange options are good. These are like mutual funds that invest only in gold, can be traded electronically. Only drawback: you cannot ‘see’ how much you hold!
Gold is the traditional mode of investment for hedging against inflation. It is also the only option that can be readily converted to cash. However, if you are wanting to invest in gold, please do your research carefully! I am still doing mine! Hopefully very soon I’ll be able to put my research into use and make my first big investment!