If you have invested in e-gold through NSEL (National Spot Exchange Ltd), then there is a procedure to convert those units into physical gold like gold coin or bars and take delivery of the same. The e-gold units held in demat form need to be transferred to the designated beneficiary account of NSEL. A beneficiary account is a demat account in the name of an individual (single or joint holding). It is similar to a bank account. This account is to be used by the account holder for holding and transacting in demat units in electronic form.

Here are some steps involved in converting e-gold into physical:

On receipt of the copy of DIS and SRF, NSEL would compute charges relating to making and packaging charges of coin/ bar, delivery charges, VAT (value added tax) and other dues (if any).

The Exchange will communicate the total amount due to the respective client through the email ID provided in the surrender request form. The investor will be required to deposit a cheque of requisite amount favouring “National Spot Exchange Ltd” with the vault. In case the amount payable on above account will be more than Rs. 50,000, the payment will be acceptable by demand draft.

The minimum quantity e-gold units can be converted into 1gm gold coin, and in denominations of 8gm, 10gm, 100gm and 1kg or in combinations of these multiples. 1 unit of e-gold is equivalent to 1gm of gold. General applicable charges are Rs. 200 for 8gm and 10gm, Rs. 100 for 100gm, and no charges if the weight goes up to 1kg of gold conversion.

When you opt for physical delivery against surrender of demat units, you will be required to pay VAT as per the current rate. However, for buying and selling of e-gold units and taking / giving delivery in demat form, you will not be required to pay any VAT, octroi or other taxes.

Equivalent physical gold is kept by NSEL in designated vault having purity of 995 and is fully insured. Delivery of physical gold will be offered in specified denominations and at particular locations only, where NSEL has made vaulting and delivery arrangements. Delivery of physical gold will be made at Ahmedabad, Mumbai, Delhi, Kolkata, Indore, Kanpur, Jaipur, Hyderabad, Cochin, Bangalore and Chennai. Investor has to intimate NSEL about his preferred choice of center in the delivery instruction slip from among the said centers.

The investor can lift the commodity from the designated vault after seven days and within 15 days from date of submission of the request. In case of non-lifting of the delivery within 15 days, the holder shall be liable to pay storage charges for the entire month. You should carry the DIS acknowledgement and original SRF along with the proof of identification.

Our reasons to buy gold have mostly been emotional, religious or traditional needs. We have often ignored the fact that gold is a non-income generating asset. People across the globe have taken to gold as investment in last several years due to global economic slow-down. This in turn has improved CAGR (compounded annual growth rate) figures of gold.

For people who want to have a portion of their wealth in gold, they must ensure their allocation does not exceed 10% of the portfolio. Here are some ways of investing in gold.

This is the most common form in which gold is bought in India. The advantage of this form is that while you enjoy owning it, it continues to grow in value. If you are buying coins and bars, you can get them from the banks in tamper-proof covers thus ensuring purity. However the disadvantages are that you pay very high making charges if its jewellery.

The purity of gold becomes another disadvantage if your gold is not hallmark certified. Getting hallmark certification is another cost added to your purchase. Another disadvantage being converting your jewellery to cash leads to unnecessary bargaining and suspicion about the quality of gold because one tries to sell it at a place that was not the place you bought it from. With physical gold you would incur storage cost. Last but not least, this form of gold attracts wealth tax!

Some fund houses have launched gold fund of funds, which invest in gold ETFs so that you don’t need to have a demat account. This option of investing gives you a convenience of doing an SIP (systematic investment plan) like investments in gold for a given period. However this comes at a cost. The fund-of-funds usually charge a 1%-2% exit load if the investment is redeemed within a year. And, there is an additional expense ratio of 1.5%.

The current high price of gold indicates its rising demand. If prices continue to rise in this manner, gold investments will surely provide handsome returns in the near future. However, this option will work only for those who have enough money and time to invest in gold. If you are retiring soon then investing in gold may not be the best option for you. Here are some of the reasons for the same.

No regular income

Your working days provided you with regular income that you used to run your family. That source of income will stop once you retire. To ensure that you continue to get regular income, you need to invest in the right products. If you invest in gold, there is a chance that the invested funds will be blocked as gold may not provide you with continued income. It is a one-time investment and gain option which you would not require during or post your retirement. To maintain the regular expenses of your family, you must invest in instruments that will provide you regular income by way of dividends or interest. Prices of gold have been increasing since the past decade but one does not know where they would peak. Those who caught the prices of gold just when they began rising would be more advantageous than those who have entered later.

You need growth

If you invest before your retirement, you must ensure that those investments provide you good returns by the time you retire. The value of gold may be rising since a while but history has shown that gold has not always been stable when it comes to price. You must secure your investment in some instruments that show constant growth. However, do not entirely rule out gold as an investment option. Diversify your investments and allocate some funds to gold. Asset allocation helps you recover losses with another instrument when one fails.

Gold that you already own

Every Indian family owns some amount of gold jewellery. If you too own gold jewellery, it is time to find out its worth. The gold that you own is an investment already made. If you already have enough, you must avoid investing in gold again

In these troubled times when every possible investment instruments from shares to bonds are struggling to give even normal rate of return gold maintained its glory of best investment option of all time. As all other investment options are in deep stress, gold is attracting fresh investors, pushing the prices to new high. However, buying gold in physical form like jewelery is a big problem due to impurity and resale value issues. Now you can use your demat account to invest in gold without worries of impurity, security.

1. Gold ETF

The gold exchange-traded fund (ETFs) are a great option for investors who want to invest in gold but without storing them. With this, you can invest in units of gold. All you need is a demat account to start buying and selling gold ETF. The process works as mutual funds and you can be assured about the quality of the gold. Your gold remains safe and you don’t have to go to the market to sell it. Gold ETFs give you tax benefits too. The best part is that you don’t need too much money for this.

2. E-gold

Investing in electronic gold or E-gold has become very common these days as that makes things easier for the investors. All you need to do is to go to the NSEL website and find a list of the depositories to open a demat account for this. You need a separate demat account for gold E-gold investment. Once you have that, it becomes very easy to trade with gold online. You need to invest in gold units and trade accordingly. You can sell them anytime you want and get the price for it.

3. Gold funds

The gold funds are like the mutual fund investments. This investment doesn’t require any demat account. You get all the same facilities from gold funds as you get from other gold investment options with demat account. You won’t have to store gold and maintain complete safety with the investment. Do adequate research about the fund houses before investing in them.

Gold, the dense, soft and shiny metal has been associated with man since time immemorial due to its high value, with gold standards being the most common basis for monetary policies until they were widely supplanted by fiat currency as in the past century.

Why opt for gold:

The uncertainty in the global economy in present times has dampened investment returns from different asset classes. Moreover, with inflation levels rising across the globe coupled by a surge in fuel prices, investors are increasingly looking at gold as an investment instrument that can provide safety and value to their investments. Though the debate that whether gold could be a hedge against inflation could go on, with some arguing otherwise, as they feel that a rise in inflation would also result in a spike in gold prices, one must remember that the precious metal is money (wealth), unlike other commodities that are used for production and consumption purposes only.

Gold is the premier store of wealth and this fact remains unchanged even though it is not the official currency anymore. And it is especially during periods of high inflation and economic crises that one needs an effective preserver of wealth or buying power.

Inflation and Gold

If inflation were to run its full course, as it happened in Zimbabwe, which went under a period of hyper inflation, the only bankable asset would be tangible assets. Paper currency could become worthless as well as debt denominated in that currency. This means that prices in paper currency terms would also be of no meaning. All assets are then priced in terms of other assets, especially those that have monetary properties and will trade at a premium because they are more useful in asset exchange transactions. In such situations, gold acts as the perfect hedge against inflation. Even if just a quarter of one’s investments are in gold, they can make up for other investments that are not keeping up with inflationary trends.

Life's uncertainties often give rise to uncomfortable situations when money is needed very urgently, and usually, this happens when a person is short of funds. These are times when gold comes in handy and be of immense use instead of lying locked up in a cupboard.

Striking feature:

While availing a gold loan, a borrower need not have a source of income. This can be of great help to homemakers who do not earn, or to those who have poor credit histories to be eligible for loans.

No hassles:

Gold loans are instant and can be availed of within 30 minutes of application, with no cumbersome documentation needed and no approval required. Such loans are usually offered for up to a year's duration but can be foreclosed whenever the borrower wishes to. An interest of up to 12% can be levied by banks on gold loans and the borrower has to pay interest as mentioned in the agreement. It can be paid on a monthly or a quarterly basis, but there is no need to pay EMIs. If interests are not paid on time, the bank may charge about 2% as penalty.

Procedure:

Almost all banks in India readily offer loans in lieu of gold, more so because it is considered a safe investment given the skyrocketing prices of the yellow metal. Most lenders offer up to 60% of the value of the gold as loan.
To begin the process, a person needs just to visit his bank, inform it of his decision, following which he will be handed out a simple form to fill up while the lender evaluates his gold's worth.

The evaluation is done by a jeweler appointed by the bank, the charge for which has to be paid by the borrower. The borrower will then have to provide a stamp paper to the bank for mortgaging the jewelry. The bank credits the borrower's account with the loan amount and the borrower is free to withdraw the amount for meeting his urgent needs.

The process may not be outright simple, but the borrower is also assured that his jewelry is in safe hands.

What value does gold hold for Indians:

Gold has universal acceptance and is highly valued as an asset class worldwide, but Indians associate with the precious metal emotionally as well. India is not only the largest consumer of the precious metal today. Since time immemorial, gold has always played a crucial role in India's social ethos, with the metal holding a place of sanctity among the predominantly Hindu population.

However, gold jewelry is worn by all Indian and they have high ornamental value during marriages, social functions and festivals.

Further, Indians use gold for other occasions as well. For instance, when a new house is constructed, people embed a few grams of gold at the foundation level as doing so is considered very auspicious.

During death, too, a small quantity of gold is placed in the deceased's mouth before cremation. And in today's world, the need of a steady cash flow becoming a priority for almost everyone, gold has become the perfect answer for those in urgent need of cash.

Loans for gold:

This need, in turn, has made handing out loans against gold jewelry a priority for many financial institutions, with many offering attractive plans, especially in smaller cities, to ensure more gold loans are availed of by the middle class. A loan against gold ornaments is a product to facilitate liquidity against such ornaments without having to sell them.

Gold jewelry can further be put to productive use when taking loans against them. When the required documents are submitted and the gold quality evaluated, a loan will get almost immediately sanctioned. The loan can be disbursed by cash; demand draft or funds transfer to an account.

Default:

If a borrower happens to default in repayment, penal interest of around 2% per annum over and above the normal rate of interest is usually levied on him.

Features:

Loans against gold jewelry come with very attractive features. The process is not complicated and loans are disbursed quickly, the paperwork is very simplified, the repayment options are very easy and the interest rates are very attractive as they are low.

Such loans do not require collaterals in cash or landed assets. Up to 80% of the value of the gold can be disbursed as loan. Gold loans further have anytime liquidity, while EMI payments do not apply and the only interest applicable is service charges. Moreover, an individual can rest assured that his gold jewelry is in the safe custody of his lender.

Investing in gold has always been a magnetic call for investors. A long term investment can lower the risk and the returns are almost guaranteed. Gold prices are hitting record highs these days causing even more people to invest in the yellow metal. Those who are already invested in gold are jovial and the ones who have not are weighing their options.

Ways of investing:

1. Spot market investment

In a spot market, transactions are settled on an immediate basis and gold is traded in quantities larger than that by individual investors. Any expert will suggest buying the metal from big spot markets like banks or bullion associations as they are certified and trustworthy institutions. These markets do not move gold to your possession physically to save money or lower the risk. All procedures are to be completed by paper work. You will then officially own the gold and can trade it.

2. Futures trading

This is a unique way of investing in gold. You have to decide a particular date in the future on which the order for buying/selling the gold will be executed at a predetermined price. You then need to sign a contract with the trading company about your norms. The futures contract states the amount of gold that will be traded, e.g., price per 1 gram or price per 10 gram etc. The quantity of gold traded varies as per the contract.

3. Physical gold

This is the most common and easy method of gold investment. You can buy gold coins, bars and even gold jewelry from a jeweler or bank. You can keep it in your bank locker or in a safe place in your home and wait for the prices to appreciate. Indians traditionally hold a lot of gold jewelry as they have sentimental value attached to it and require it at the time of marriages etc.

Gold price drivers:

1. Investors

One of the main reasons for the rise in gold prices is the rising number of investors flocking towards the metal in the wake of the global financial crisis. The rising price and safe haven status of gold attracts many investors as all other investments seem uncertain. The total amount of investments is pushing the gold price and market forward.

2. Oil prices

Gold and oil prices have always been related. This could probably be the case because rising crude oil prices are inflationary and gold is considered a hedge against inflation. Thus, gold can be used as a hedge against oil price rise. The value of gold only increases when inflation rises. So part of the rise in gold prices can also be attributed to rising oil prices.

3. Central banks’ gold buying

Central banks buy gold from bodies such as the International Monetary Fund to build their gold reserves. When they buy or sell gold, it has an impact on the gold price. The Reserve Bank of India had recently bought about 200 tonnes gold from the IMF to boost its reserves.