TLDR;
This video features a discussion on investing in gold and silver with Kishor Narn, Executive Director at Motilal Oswal. The conversation covers the reasons behind the recent gold and silver rally, future price predictions, the impact of central banks and global events, and various investment options. Key takeaways include understanding gold as a currency and safe haven, the role of interest rates, the gold-silver ratio, and the nuances of physical vs. digital gold investments.
- Gold is not just an asset but a currency and a safe haven.
- Interest rate cuts are generally good for gold prices.
- Silver's industrial use is increasing, especially in solar panels and electronics.
- Buying gold in Dubai is no longer significantly cheaper than in India due to changes in import duties and GST.
- Sovereign Gold Bonds are currently discontinued, but ETFs and digital gold are viable alternatives.
Introduction to Gold and Silver Investments [1:11]
The video starts with an intro to gold and silver investments, highlighting the recent rally in gold and silver prices. Gold has given returns upwards of 60% in the last year. Kishor Narn from Motilal Oswal simplifies the reasons behind this rally for the audience.
Gold as a Currency and Safe Haven [2:13]
Gold is discussed not just as an asset class but as the ultimate currency and a store of value. Historically, gold has maintained its purchasing power. The increasing gold price in India and globally is attributed to its role as a safe haven during financial, geopolitical, and health crises like COVID-19. Gold doesn't offer interest, so it becomes more attractive when interest rates are low and inflation is high.
Future Predictions for Gold Prices [6:40]
The expert predicts continuation of the gold and silver rally due to anticipated interest rate cuts by central banks, especially the US Federal Reserve. While giving an exact number is tricky, he estimates gold prices could reach ₹1,30,000 to ₹1,35,000 per 10 grams, a roughly 20% increase, but cautions about potential dips along the way. Diwali demand from India doesn't significantly impact global gold prices, as jewelers prepare in advance.
India's Role in the Global Gold Market [9:31]
India is the second-largest consumer of gold, after China. The big players driving gold prices are global central banks. The expert has around 20% of his portfolio in gold.
Intrinsic Value of Gold [11:50]
The intrinsic value of gold is related to its production cost, which is around one-third of the current price. The market determines the premium people are willing to pay. The current price is three times the cost of production, which is historically high. This is due to global uncertainties and the reconfiguration of the global system, leading to increased demand for safe havens.
Silver's Potential and the Gold-Silver Ratio [17:51]
Robert Kiyosaki predicts silver prices could increase fivefold in the next few years. The expert anticipates silver could reach around ₹3 lakh per kilo in about 18 months. The gold-silver ratio, traditionally 60-70, is now around 100, indicating silver might be undervalued. Silver's increasing industrial use, especially in solar panels and electronics, is driving demand. Silver production is currently less than demand, causing a rally.
Risk and Volatility of Silver Investments [24:12]
The expert doesn't have silver in his portfolio due to its higher volatility compared to gold. Silver offers higher returns but comes with higher risk. If gold corrects by 10%, silver might correct by 20-25%. Silver is a high-beta commodity.
Buying Gold in Dubai vs. India [26:22]
Buying gold in Dubai is no longer significantly cheaper than in India. Import duties have reduced in India, making the prices equivalent. The designs and making charges differ, with Indian jewelry often being handmade and commanding higher making charges (20-25%) compared to Dubai (7-8%). The color difference is due to the mix of metals like zinc (yellowish) or copper (reddish). India has a strong hallmarking system with traceable numbers on jewelry.
Gold Purity and Hallmarking [28:39]
The color of gold doesn't dictate its purity. The hallmarking system in India ensures traceability and quality. Earlier, recycled jewelry had only 60% gold, but now the government has standardized hallmarking.
Gold Jewelry: Value and Purity [33:41]
Frequent churning of gold jewelry can lead to loss due to making charges. 24 karat gold is 999 or 995, 22 karat is 916, and 18 karat is 750. For wearing purposes, 18 karat jewelry is a good option and is globally standard. ijarates.com provides updated gold rates.
Investment Options: Physical Gold, ETFs, and Digital Gold [38:06]
For investment, physical gold (995 is fine), Gold ETFs, and digital gold are options. Gold ETFs avoid GST, with fund managers handling it. Gold ETFs have expense ratios of around 0.25-0.3%. Gold Bees is one of the oldest gold ETFs. Digital gold is like buying a coin on an app, with 3% GST, but offers easier logistics.
Sovereign Gold Bonds and Other Commodities [46:55]
Sovereign Gold Bonds are currently discontinued. Crude oil is the largest commodity traded globally. Other commodities include aluminum, copper, zinc, sugar, wheat, and soybeans.
Investing in Future Technologies and Lithium [49:41]
EVs are seen as a transitioning technology, with hydrogen being the future of automobility. Lithium is used in batteries, but nickel cadmium batteries are also emerging. Investing across the supply chain of the EV ecosystem is recommended.
Investing in Chinese Companies and Palladium [54:32]
Investing in Chinese companies can be done through Hong Kong stock exchange or Singapore mutual funds. Palladium has underperformed due to reduced use in ICE vehicles.
Portfolio Allocation and Risk Management [57:37]
Depending on risk appetite, 15-20% of a portfolio can be allocated to commodities or commodity-related stocks. Younger investors can consider silver for higher returns. The goal is to balance the overall volatility of the portfolio.