Gold price by Investorocean.com
Gold in Futures Markets vs. Spot Market
Indian market has always had encouraging response for gold investments; no matter what the prices are, gold has always been one of the most sought after commodity and stock option. Investing in the futures or spot markets are two options available to an investor or trader.
Gold futures and gold spot are two very different types of Gold investments.
Gold in Futures
Gold futures can be simply put as an investment option where you will have the opportunity to acquire a future contract of the asset at a price predicted at the time of its delivery. It is a standardised contract created by the futures market to offer a defined amount of subject matter at a future time and location. It refers to a trading objective to predict the price of gold in the international market on a specific date in the future. The profit and loss of investors who buy and sell gold futures is calculated using the gold price differential between the two times of entering and exiting the market.
Gold in Spot
Gold in spot market or Gold ETFs are virtual gold or digital gold. This investment option does not provide physical gold in delivery and always trades in digital transactions. An investor can invest on gold at the given market rate and may earn interest or loose depending upon market fluctuations. Spot market for gold is similar to the stock market and needs to be monitored likewise.
Gold ETF vs Sovereign Gold Bonds
Lately, two gold investment in paper form with actual gold as the underlying asset have emerged as a popular option that are Gold ETFs and the Sovereign Gold Bond (SGB).
Gold as Exchange Traded Funds (ETFs) Passive investment instruments that invest in physical gold and thus are predicated on price of gold. Gold ETFs are listed on the Indian Exchange as other stocks or equities and track gold prices and can be purchased through your trading or mutual fund account. ETFs are a fantastic alternative if you want to invest for the short term or in monthly instalments like a SIP.
Indian Government also issues bonds through the Reserve Bank of India called Sovereign gold bonds, or SBGs. These gold bonds are sold as as unit in which each unit is valued at one gram of gold with purity of 99.9 percent. Since SGBs are government-issued securities that are a sought after and a safer investment in gold. Their worth is measured in multiples of gold grams. SGBs have seen a large growth in investors, as they are seen as a viable alternative to actual gold. However, SGBs has a lesser liquidity than other gold investment in the market. If SGBs are left to mature i.e., for a period of 8 years and then retained, the gains are not subjected to tax. However, if the returns after maturity is sold off then it is treated as capital gains and is hence taxable.
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