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A EXPLORATORY STUDY REGARDING GOLD AS AN

VIABLE INVESTMENT OPTION

INTRODUCTION:

Gold is considered by many, to be the best investment you can make to protect yourself during

stock market declines and inflation. In fact, history shows that the performance of gold goes up

in times of high inflation. However, the price of gold also has its highs and lows and you could

just as easily lose money investing in gold as with any other investment.

The Internal Revenue System classifies gold as a collectible and the tax rate for long term capital

gains is 28 percent. Since there are no dividend or interest payments made, gold investors are

dependent on rising market prices for positive returns.

Gold is the oldest precious metal known to man and for thousands of years it has been valued as

a global currency, a commodity, an investment and simply an object of beauty.

CHARACTERISTICS:

Gold (Chemical Symbol-Au) is primarily a monetary asset and partly a commodity. Gold is the world's oldest international currency. Gold is an important element of global monetary reserves. With regards to investment value, more than two-thirds of gold's total accumulated

holdings is with central banks' reserves, private players, and held in the form of high-karat jewellery.

Less than one-third of gold's total accumulated holdings are used as commodity forjewellery in the western markets and industry.

TPYES OF GOLD INVESTMENT:

Gold can be bought in many different waysgold bullions, gold coins, gold mutual funds, gold

mining stocks, gold futures and gold options.

Gold bullions: Also known as bars, are generally bought and sold through brokers and gold

dealers. They are traded at a price that is above the market price. Once purchased, the bars areusually kept in the custody of the broker or the dealer and you pay for the storage and insurance

fees. The dealer will also give you a numbered certificate where the numbers match those of the

gold bars youve bought. When you sell the bars, you must provide the certificate to prove their

authenticity and identity.

Gold coins: Theseare easier to store than gold bars. Though they trade at the same price as gold

bars, they are considered to be more cost effective, as you dont have to pay storage or insurance

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fees. There are two things to consider when buying gold coinstheir numismatic value and the

gold content. The former refers to the value of the coins as a collectors item. The second refers

to the amount of gold that has gone into the making of the coin. The higher the gold amount, the

more valuable it is.

Instead of buying gold, you could invest in gold mining companies. Bear in mind that the stocksof gold mining companies dont always follow the trend of gold prices. But over the long term,

any short term volatility of stock prices settle down to follow the gold prices in the market. If

you want to invest in gold mining stock, try and find companies that have been mining for a long

time and have low extraction costs.

Gold mutual funds and gold exchange-traded funds (ETF): These are another way to invest

in gold. As with any mutual fund, gold mutual funds offer a diversified portfolio of gold mining

stocks. Look for a fund that has a low expense ratio. Gold ETFs allow you to own gold bullions

without the added hassles of storage and insurance. Many ETF shares are traded on the major

stock exchanges.

Gold futures contracts and gold options: These can be used to insure already owned gold

investments or speculate on future gold prices. In the case of futures contracts, you get quite a lot

of leverage and you could make huge profits on your investment. But with the volatility of gold

prices, you could also sustain huge losses with the futures contracts.

OBJECTIVES OF THE SYUDY:

The objectives of the study are to:

1. Study the Gold as a viable investment option2. Stress upon the inclusion of Gold in a portfolio for risk diversification3. Assist the investor in the selection of the best form of Gold4. To overview the different ways of investment in goldSCOPE OF THE PRESENT STUDY

The scopes of the present work are the following-

1. The analysis of the factors which affect the prices of gold and the investment decisions ingold.

2.

RESEARCH METHODOLOGY:

Type of study: Exploratory

Sample Design: Convenience.

Sample Size: Fifty

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Data Source: www.mcxindia.com

Type of data: Primary & Secondary data