Gold prices remained steady in the futures market in line with the international trend. In early trade, gold prices on the MCX quoted at Rs. 46,509 per 10 gm. In fact the monthly fall the precious yellow metal has logged for June month has been the steepest. Internationally the decline has been a staggering 7 percent.
As per the Reuters report, the steady fall in the price of gold has been on the back of shift in the US Federal Reserve policy stance to hawkish. In the earlier meet this month, the Fed proposed to begin hiking interest rates as early as 2023 as against the earlier proposed 2024.
Here are the safe and lucrative ways in which investors can bet on gold for a good return:
1. Sovereign Gold Bonds:
The fourth tranche of SGB 2021-22 will open between July 12 and July 16. SGBs can be bought in for a minimum of 1 gm i.e. 1 unit of SGS is equivalent to 1 gm. SGBs are bonds issued by the RBI on behalf of the government of India.
On the basis of the average price of gold in the preceding foztnight, the RBI comes out with the issue price of Soverign gold bonds is decided. It is generally close to the market rates.
SGBs are the safest bet providing investor even with the return of 2.5% interest return per annum which is payable semi-annually. So, this is the only form of gold investment which is interest yielding. Further it is tax exempt, in case the SGBs are held until maturity.
2. Gold ETFs:
The investment in gold as ETF can be highly lucrative if one invests a higher amount and involves in regular trade. Also, these entail a lower cost or expense ratio. Apart from the low cost, one should also consider gold ETFs past performance.
Apart from the investment, this investment can also serve as the collateral and one can secure funds against it if in need.
Further besides the cost associated i.e. payable to the brokerage there is no entry or exit load charges. Also, in the case if Gold ETFs are held for over a year then there is long term capital gains tax on it. But there is no securities, wealth tax or VAT on Gold ETFs.
Outlook for Gold 2021
The pullback in gold has been seen after the Federal Open Market Committee remark which sounded optimistic on the recovery of the US economy.
"Progress on vaccinations has reduced the spread of COVID-19 in the United States. Amid this progress and strong policy support, indicators of economic activity and employment have strengthened," the statement said.
The gold price sustaining below $1,800 per ounce indicates a "lack of an immediate impetus to buy the yellow metal", analysts at Canadian bank TD Securities said in a note on Thursday, "as the Fed clarified its reaction function with respect to an upside scenario in inflation, which suggests the Fed isn't behind the curve by any means."
The analysts at TD Securities have lowered gold forecast on June 24, expecting prices to drop in the third quarter before turning higher later in the year and into 2022.