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February 20, 2009

Interesting Spectrum of Rates of Gold Coins across a few Banks Today

Retail and Small Investors need to feel and touch tangible Gold…They assign more safety to Tangible Gold than Exposure to Gold in other ways…Also they can commit smaller amounts to buy a few grams of Gold

So it was was with some interest and curiousity that I again reached out to a few Banks today to gauge what they had to Offer in Gold Coins…Check out the results below

GOLD COINS SOLD BY BANKS ON FRIDAY FEB 20,2009

 

Rate in Rs and inclusive of 1% Tax        NA: Not Available

Details of Purity and Motifs Stated

Coin Shape is Round, unless otherwise specific shape stated

 

Bank

 

 

2.5 gms

 

5 gms

 

8 gms

 

10 gms

 

20/50/100 gms

 

 

 

Union Bank

 

 

NA

 

8596

 

Bank Logo on Coin &

.995 Purity

 

13744

 

Bank Logo/God Motifs & .999 Purity

 

17192

 

Bank Logo/God Motifs & .999 Purity

 

 

 

NA

 

Bank of Baroda

 

 

NA

 

 

NA

 

14045

 

Bank Logo & .999 Purity

 

 

 

NA

 

 

NA

 

 

ICICI Bank

 

4894

 

Heart Shaped, .995 Purity

 

9468

9783 Combo

 

Bank Logo, Ganesh/Lakshmi

Combo Motifs &

.999 Purity

 

15020

 

Bank Logo/God Motifs & .999 Purity

 

 

NA

 

20 gms    :   37340

50 gms    :   92855

100 gms   : 184968

 

Bank Logo/God Motifs & .999 Purity

 

Clearly Union Bank is the Cheapest…In fact 8 gms category allows us to compare apple for apple…ICICI Bank has always been known to be more expensive than PSU Banks…their today’s rate for a .999 Pure Gold Coin of 8 gms is Rs 15020,that’s over 9% more expensive than the Rs 13744 quoted by Union Bank and just under 7% more or nearly Rs 1000 more than the Rs 14045 quoted by Bank of Baroda 

These Coins are Imported and the Surge in Gold Price and the 20 % Rupee Depreciation in 2008 has clearly impacted rates too

ICICI Bank has a wide variety of Coins available…It’s 5 gms Combo offer of God Ganesha and Goddess Lakhsmi Motifs ( Each a 2.5 gms coin in a single packing ) is a very popular purchase and the Bank prices it higher than a Plain 5 gm Gold Coin Offer 

The underlying Gold Price for .999 purity for 10 gms is Rs 15700 today…so even the Union Bank Offer today,the  cheapest of the three banks,of Rs 17192 is 10% higher

And if you dare to extrapolate the ICICI Bank rate of Rs 15020 for 8 gms and it’s  rate of Rs 37340 for 20 gms ,you will arrive at a computation of bewteen Rs 18750 to Rs 19000 for a 10 Gms Coin !….that’s 20% higher than the underlying !…Gosh !

You’re paying a high Premium when you buy Gold Coins from Banks…for surety of Gold Content,weight,purity and therefore better resale values

When you purchase Gold Coins from Jewellers,you get .995 purity…..but you run the risk of Gold Content not really being as stated….It has been reported that Gold Coins turn out to be actually Silver !…and many have some Iridium too !…so you may be paying for Gold,but getting shorted really ! so when you buy from Jewellers ,insist on a Bill and check that the Standard Gold Hallmark is there on the Coins…currently the Television Channels are running Government Ads to highlight this !

International Price of Gold is US $ 976/oz….Now this is a Troy Oz and is 31.1gms…A regular Oz is a weight measure for Food etc and is 28.35 gms…Thus for Gold this translates to Rs 15691 /Ten grams read more

Sudden Fall in Equities soon !? I can Sense and Feel it…Better Hedge Equities Right away

As Wall Street slaps Washington,Dalal Street will damn Delhi too….It’s been perceived as a STIMU-LIE Package in both countries

Yesterday the DOW teetered more towards the Edge clsoing at 7466,the lowest in six years

It’s just past 2.30 pm in Mumbai and the Sensex and Nifty are struggling to stay over 8800 and 2700 respectively

I can sense and feel that soon,the Dow may just plunge 500 to 1000 points in a Day soon…we will follow as we too will test October 2008 Lows

This Intuition or gut feel is strongly supported by weakening macros fundamentals in USA particularly and the world over in general…The IMF has already stated that it expects many more countries to come to it for Bail-Outs

I was watching the classic Movie ‘Sea Biscuit’ last night on Star Movies…What a parrellel !…The Movie is about a Champion Horse and Horse Racing and is set in the times when America was devastated by the Depression of 1929…The Wealthy became Poor,literally overnight,and lost their Homes and All their Assets….they took to the Highways and settled in poorer conditions….It’s happening allover again,I daresay ! 

If disinclined to sell off equities at these low levels,atleast exercise prudence to fully hedge your equity portfolio right away

You can do this in Three Ways

  • Sell off All or Part of Equities…Hard Call at these Low levels already as Heavy Loss sitting in Portfolios…but it will give you Capital to Grasp Greater Opportunities ahead
  • by committing appropriate additional Funds and Investing in negatively or less positively correlated Investments to Equity…Silver and Gold as Alternative Investments run at the top of my mind  or
  • Go Short in Index or Specific Stock Futures or buy Protected Index or Stock Puts…by shorting Futures ,you are locking in the current value of your equity portfolio…so if the Market fall,so will the value of your portfolio…but this fall will be offset by the gains you make on your Futures Contracts that you shorted…..by buying Protected Puts,you pay the Premium to insure your Equity Portfolio from any Fall,while keeping the upside potential alive…this would seem the best strategy,if you need protection from significant downside,but don’t really have such an intense feeling or sense like I do that this will happen suddenly and soon…It is better to pay a 2%-3% Premium to protect from a 15% to 20% potential downside from here…The OPTIDX Nifty PE with Strike Level of 2700 and Market lot of 50 has a premium of Rs 47 and Rs 142 respectively for Feb 26,2009 and March 26,2009 contracts…You’ll be paying Rs 2350, that’s under 2% costs, on a contract Value of Rs 135000 for a week’s hedge and a high Rs 7100,under 5%  cost, for a month’s hedge…the underlying Nifty is 2717 and it’s just past 2.30 pm
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