Paper gold shines better on Akshaya Tritiya

Even as physical gold prices remained flat on the auspicious day of Akshaya Tritiya on Tuesday, the yellow metal saw a jump in value in the dematerlised, or paper, format on Indian bourse, analysts said.

On the National Stock Exchange (NSE), Canara Robeco, HDFC, Religare, Kotak and State Bank of India (SBI) mutual fund's gold exchange traded fund (ETF) made healthy gains. However, Birla Sun Life, Goldman Sachs and IDBI'S gold ETF declined in the day's trade.

Definition-wise a gold exchange-traded fund (GETF) is an exchange-traded fund (ETF) that aims to track the price of gold. The GETFs are units representing physical gold which may be in paper or dematerialised form. These units are traded on the exchange like a single stock of any company.

Gold ETF's are intended to offer investors a means of participating in the gold bullion market without the necessity of taking physical delivery of gold, and to buy and sell that participation through the trading of a security on a stock exchange.

The Canara Robeco mutual fund (MF)- gold ETF gained 1.28 percent in the day's trade and closed at Rs.2,595 from its previous close of Rs.2,560.

The HDFC GETF was higher by 0.95 percent at Rs.2,560 per unit. This was followed by Religare Invesco GETF which rose by 0.43 percent at Rs.2,570 per unit. Kotak GETF grew by 0.34 percent at Rs.248.80 per unit. The State Bank of India (SBI) GETF increased by 0.25 percent at Rs.2,552 per unit.

However, Birla Sun Life MF-GETF declined by 0.86 percent at Rs.2,575 per unit, followed by Goldman Sachs GETF was down by 0.15 percent at Rs.2,475 per unit and IDBI gold exchange traded fund dropped by 0.13 percent at Rs.2,590 per unit.

"As per preliminary indications we find around 30 percent growth in investments our gold ETF this year Akshaya Tritiya as compared to last year's," Sundeep Sikka, chief executive officer, Reliance Capital Asset Management told IANS over phone from Mumbai on Tuesday.

Curiously this seems to be much higher than the 15-25 percent sales hike that jewellers predict.

"However what is further interesting is that investors in GETF generally look at returns while those who buy the yellow metal would acquire irrespective of the fact whether the prices go up or down," Bhuvana Shreeram at Financial Freedom Golden Practices told IANS over phone from Mumbai.

Though gold for the last two years did not give best of the returns, one should keep investing in the metal more for hedging perspective, said

Sikka.

"Gold should be part of an investor's portfolio to the extent between 5-15 percent," he said.

"Last 10-12 years we saw different market cycles with equities and others doing well alternatively. One cannot go by predictions on gold. Last one month there was positive returns from gold," Sikka said.

However he agreed that gold as an asset class in mutual fund industry (MF) is stagnating now. When equity is good people tend to invest in equity, Sikka said.

"In long term equity and gold has negative correlation. But in 2008 when there was an equity meltdown portfolios with gold held up," Shreeram said.

"Gold as an asset class has not done well for the last three years. It gave negative returns. We suggest people to have 10 percent of their investment portfolio as gold," she said.

Asked about metal gold versus GETF she said there is no difference between these two forms in form of tax advantage.

"In holding physical gold there is the cost of holding-rent to bank lockers and others. As an asset portfolio it should be ETF and for hedging

purposes," she said.

On the performance of various GETFs she said there is not much of a great difference as almost are at par.

"Perhaps there may be slight difference between two funds owing to the tracking errors of a fund manager. So only the cost would determine where investors would like to put their monies," Shreeeram said.