Daily Investment Tips

Its never easy for a small investor to invest in Gold. There are practical problems with owning gold. It’s heavy, and not easy for the average investor to buy, sell, ship, and store. Gold involves a lot of transactional costs.

Invest in Gold ETF

One easier way for retail investors or small investor can get exposure to gold is through exchange-traded funds. The exchange traded fund is a trading platform where investors can invest in funds that track a particular investment eg. gold, oil, emerging markets etc. Instead of directly buying a commodity, you buy piece of the fund which in turns invests directly into the commodity.

For example, the SPDR Gold Trust holds actual gold bullion. The PowerShares DB Gold Fund holds futures contracts linked to the price of gold, and the Market Vectors Gold Miners ETF holds stock in gold mining companies.

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The price of Gold futures continue to shoot over the roof. One driver of the price is the recent gold purchases by India Central bank from the IMF.

The central bank of India has purchased 200 metric tonns of gold from IMF.

According to this economics time article.

India is spreading its assets which are said to be currently over-weighted with foreign currency, mainly in the form of sovereign US Treasury bonds. In other words, it is a hedge against a falling dollar.

India is the world’s largest private gold consumer, but the government’s holding of gold as an asset is modest. Even so, the latest purchase puts it at Number 10 among the list of top 10 gold-holders in the world.

Of India’s current foreign exchange reserves of nearly $285 billion, foreign currency assets account for more than 90% ($268.3 billion), followed by gold ($10.3 billion), IMF’s Special Drawing Rights ($5.2 billion) and a reserve position in the IMF of $1.59 billion.

While India’s current gold holdings, accounting for just 3.7% of assets, are said to be historically low, buying 200 tons in addition to the 358 tons it already holds is expected to bump up the gold reserves to more than 6%.

As India, China and Brazil buy gold it means more Dollars sales. The dollar may continue sliding downward.

written by Constantine Njeru \\ tags: Bank Of India, Brazil, Buy Gold, Central Bank Of India, Currency Assets, Foreign Currency, Foreign Exchange Reserves, Gold Futures, Gold Holdings, Gold Reserves, Imf, India Central, India China, Private Gold, Reserve Position, Sovereign, Special Drawing Rights, Time Article, Tonns, Us Treasury Bonds