24 Carat or 26%?

Posted On Tuesday, Aug 04, 2009


According to an article in the Business Standard, 74% of the people surveyed said they prefer purchasing gold and gold-related products at these current price levels.

So, are you in the 26% that did not wish to buy gold?

Here are the main reasons why we think you should buy gold.

    1. Gold is the only currency to have survived through millennia and is not subject to government manipulation

      Gold is in many ways considered better than money. This is because the metal has a relatively fixed supply and is the only currency that cannot be inflated at the discretion of politicians or bureaucrats. The actual value of paper currencies is suspect as their supply can be increased by a decree to print larger amounts. Central bankers have been printing money over years leading to depreciation of the paper currency whereas gold acts as an excellent store of value preserving the purchasing power.

    1. Effective hedge against currency debasement and inflation

      In an effort to combat one of the worst financial crisis and recession, central bankers around the world have resorted to printing money in order to infuse liquidity in the economy. This money printing exercise leads to debasement of currency as it is not backed by any real asset and is only a piece of paper created at will and in as much quantity decided by them. As a result, money supply in the system has increased significantly. This increased money supply forms a large reservoir of money hanging over the economy. This would eventually translate into higher inflation.

    2. Profit from the decline in the value of U.S Dollar

      U.S has been forerunner in terms of debasing its currency. The dollar seems more vulnerable than ever given the extent to which the US Federal Reserve has expanded its balance sheet by printing money and the extent to which the federal government has widened the national deficit. Decades of deficit spending by the U.S federal government has built long term structural fiscal issues leading to deterioration of the U.S currency. Piling of new spending on top of already enormous deficits will have adverse consequences. Gold being an ultimate reserve currency moves inversely proportional to the world’s reserve currency i.e. dollar.

  1. Hedge against crisis

    Gold acts as an excellent hedge against any economic and financial crisis. Gold is highly uncorrelated from most of the other traditional assets and therefore tends to minimize losses in times of negative equity markets. Gold is also much sought after in times of turmoil and financial upheaval which leads to increase in gold prices during such times.

On account of all of the above reasons, we recommend a 15-20% allocation to gold.
Click here to see the asset allocation that works best for you.

But, make sure you invest in the "right" form of gold. Don’t buy any form of gold.

Buy the Quantum Gold ETF which owns the purest form of physical gold (0.995 fineness, which is 24 carats) on your behalf. The gold is safely locked up in a vault.

Gold should be bought in Quantum Gold ETF because:

  • It is relatively inexpensive since it does not involve any price premium or making charges
  • Gold held is pure gold (0.995 purity) and purchased only from refiners accredited with the London Bullion Market Association.
  • It is hassle free as you need not worry about storing it securely - Quantum Gold ETF stores the physical gold in secured vaults.
  • Gold held by the Quantum Gold ETF is completely insured.
  • It is convenient to buy; the Quantum Gold ETF is listed on the NSE; just call your broker and place the order. Or buy it online - just as you would buy an equity share

Given the above advantages, it would be a prudent decision to buy gold only in the form of Quantum Gold ETF.

Why you should buy the Quantum Gold ETF:

Since the launch of the Quantum Gold ETF in February, 2008 the annualized returns as on 30th June 2009 was a gain of +15% per annum vis-à-vis a loss of -12% per annum for the BSE-30 Index.
Gold has proved to be a valuable hedge against declining equity markets.

The Quantum Gold ETF has tracked gold prices very closely.
The returns from the Quantum Gold ETF and domestic prices of gold are given below:

Returns*Quantum Gold FundDomestic price of Gold
Since Inception (22nd Feb 2008)15.14% per annum13.72% per annum
1 year11.35%12.40%

*As on 30th June 2009

While we like gold as an investment, we are not dazzled by its glitter.
Nor are we swayed by the "fashion" of gold that seems to capture the imagination of others.

Our views on gold are studied - and measured.

We have written more than 30 articles to explain why you should - or should not - buy gold and how much of your wealth should be invested in gold.

After all, for the 74% who are buying gold as a "store of value" they need to be informed on their investment.

While many may sell you the concept of "making the trade" and going ahead with a 24 carat investment; we make sure we always monitor its value.
And carefully explain why you should - or should not - own gold.

So, whether you are part of the 26% that does not own the 24 carat store of value or whether you are part of the 74% that does own gold, feel free to contact us and we will be happy to explain why you should be a 100% Quantum Gold ETF investor.

Above article is authored by Quantum.

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