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Soaring gold prices have again put investors in a fix. The sharp rise in the commodity has resulted from a weaker dollar, an increase in physical demand and losses in equities.
On August 22, the price of gold stood at Rs 31,375/10 g, an increase of 14.82 per cent compared to corresponding period last month. Though selling gold at current levels looks attractive, experts say there might be a further rise in gold prices, and this might be worth the wait.
“Gold prices are expected to move up on the back of strong physical demand and inflows in gold ETFs (exchange-traded funds), which are likely to support prices. It is likely to trade higher, towards Rs 31,400-31,700 levels, and any downside could be limited to Rs 30,400 levels,” said an Emkay report.
Laksmi Iyer, head (fixed income & products), Kotak Mutual Fund, says for someone who has excess allocation towards this segment, this would be a good time to sell gold. “Typically, an investor’s portfolio should have investments in gold in the range of five to 15 per cent only.”
However, C P Krishnan, whole-time director, Geojit Comtrade, cautions investors shouldn’t sell the entire gold portfolios at current levels. One should sell in a staggered manner, as prices are further expected to rise. Therefore, traders, short-term buyers and investors holding excess gold can avail of this opportunity. In addition, tax payable while selling paper gold should also be considered.
E-gold is treated like physical gold and qualifies for long-term capital gains benefits if held for at least three years. However, gold ETFs qualify for long-term capital gains treatment if these are held for just a year. If units of paper gold are sold, while these qualify for short-term capital gains, you would be taxed according to your tax bracket. Therefore, calculate your actual returns after considering the tax sell paper gold accordingly.
You would have to forgo much more while selling jewellery. Investment products such as gold coins and bars don’t have a standard resale value, despite being 24-carat pure.
Branded jewellers such as Tanishq, Reliance Jewels and PNG Jewellers deduct two per cent if you exchange a 10 g gold coin/bar with 24-carat purity. However, if the same coin/bar had 24-carat purity, the jeweller would deduct eight per cent. This means if you exchange a 10 g gold coin with 22-carat purity, the jeweller would deduct eight per cent, and that gold coin would have a resale value for 9.2 g, instead of 10 g. If this is the case for coins, one can imagine the deduction a jeweller would charge on a piece of jewellery, especially if it isn’t hallmarked.
If you plan to sell your gold coin/bar just to book profits, do so at a jewellery store that wouldn’t go for such deductions. Most local jewellers give 100 per cent resale value for gold coins and bars with 24-carat and 22-carat purity.
Therefore, only short-term players can make use of this opportunity. Dhirendra Kumar, chief executive at Value Research, says, “Investors who have SIPs (systematic investment plans) in paper gold can continue to stay invested, as long-term investments in this asset class will prove to be beneficial.”
On August 22, the price of gold stood at Rs 31,375/10 g, an increase of 14.82 per cent compared to corresponding period last month. Though selling gold at current levels looks attractive, experts say there might be a further rise in gold prices, and this might be worth the wait.
“Gold prices are expected to move up on the back of strong physical demand and inflows in gold ETFs (exchange-traded funds), which are likely to support prices. It is likely to trade higher, towards Rs 31,400-31,700 levels, and any downside could be limited to Rs 30,400 levels,” said an Emkay report.
Laksmi Iyer, head (fixed income & products), Kotak Mutual Fund, says for someone who has excess allocation towards this segment, this would be a good time to sell gold. “Typically, an investor’s portfolio should have investments in gold in the range of five to 15 per cent only.”
However, C P Krishnan, whole-time director, Geojit Comtrade, cautions investors shouldn’t sell the entire gold portfolios at current levels. One should sell in a staggered manner, as prices are further expected to rise. Therefore, traders, short-term buyers and investors holding excess gold can avail of this opportunity. In addition, tax payable while selling paper gold should also be considered.
E-gold is treated like physical gold and qualifies for long-term capital gains benefits if held for at least three years. However, gold ETFs qualify for long-term capital gains treatment if these are held for just a year. If units of paper gold are sold, while these qualify for short-term capital gains, you would be taxed according to your tax bracket. Therefore, calculate your actual returns after considering the tax sell paper gold accordingly.
You would have to forgo much more while selling jewellery. Investment products such as gold coins and bars don’t have a standard resale value, despite being 24-carat pure.
Branded jewellers such as Tanishq, Reliance Jewels and PNG Jewellers deduct two per cent if you exchange a 10 g gold coin/bar with 24-carat purity. However, if the same coin/bar had 24-carat purity, the jeweller would deduct eight per cent. This means if you exchange a 10 g gold coin with 22-carat purity, the jeweller would deduct eight per cent, and that gold coin would have a resale value for 9.2 g, instead of 10 g. If this is the case for coins, one can imagine the deduction a jeweller would charge on a piece of jewellery, especially if it isn’t hallmarked.
If you plan to sell your gold coin/bar just to book profits, do so at a jewellery store that wouldn’t go for such deductions. Most local jewellers give 100 per cent resale value for gold coins and bars with 24-carat and 22-carat purity.
Therefore, only short-term players can make use of this opportunity. Dhirendra Kumar, chief executive at Value Research, says, “Investors who have SIPs (systematic investment plans) in paper gold can continue to stay invested, as long-term investments in this asset class will prove to be beneficial.”
