Moneylife Events
Gold: Many wrong beliefs, strongly held

In an enlightening session on Gold at the Moneylife Foundation Knowledge Centre today, Debashis Basu, editor and publisher of Moneylife used decades of data to expose many myths about gold that are (freely available and strongly propagated on the Internet) and strongly held by both retail and institutional investors. He also suggested what should be the correct approach to gold buying

On occasions such as Akshaya Tritiya and Dhanteras, which are considered as auspicious days for buying gold, the demand for gold as investment and jewellery goes up. In India, gold is bought for various occasions. The demand peaks around the festive and the wedding seasons. But should gold be a significant part of your investment? In nominal terms the price of gold has more than tripled in the last 20 years, despite the recent crash, this makes it a very attractive asset class—with the benefit of hindsight. But what we do really know of gold prices? In a special seminar on investing in gold conducted by Moneylife Foundation, Debashis Basu, Moneylife Foundation trustee and editor of Moneylife magazine, explained the various myths about gold as an investment and what really drives the price of gold. Similar to the seminars exclusively on gold in the past, this one too received a huge participation of Moneylife Foundation members.
 

Mr Basu gave the participants a brief of the history of gold. Gold may go back to a thousand of years, but it’s only in the recent century where its fondness as investment has grown. Mr Basu explained why gold is such a unique commodity and then further explained how gold was used as money. On going into history Mr Basu showed that crashes such as the recent one is inherent with all market-linked products and since gold is one, nobody should be surprised. Many investors just look back 10-15 years, but to get the true sense of an asset one needs to go deeper into history. Mr Basu took the participants through the gold bubble and bust of the 1980s. Many buy gold because they consider gold as a safe haven or an inflation hedge. But these are all myths as they are not supported by long term historical facts. Through the help of graphs and charts, Mr Basu addressed five different myths regarding the precious metal.
 

If you are interested in reading more on the myths about gold, go ahead and read our Cover Story: Gold Turns Cold
 

Finally, he explained the six main factors that drive gold demand and how little we know about them. Unlike other assets there is no way to value gold. There are many complex and global factors that affect the price of gold, he explained. Not even institutional investors keep a regular track of them or have a model to use them to arrive at a fair value of gold.
 

The presentation was followed by an interactive session where the participants put forth their queries on gold.

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COMMENTS

pawan

4 years ago

Mr. Basu,
It is disappointing to see your presentation on gold turns cold. Everybody from a villager to a housewife knows that gold prices fluctuate over periods. what is new about it? just because it has fallen in last few months has compelled you so much to put a presentation on the same.

I am not an advocate of gold but would put that the asset class with highest emotion involvement is GOLD(at least in India). This lets people buy it and hold it. It is the only asset class where people are not perturbed by fall in prices. and so, this is the asset class which they hold for the longest period of time. This asset class gives financial security to people in their dire needs. THis is the single most reason why it is and should remain an important asset(forget all other worldly theories of economists, experts etc.)

You and all should understand that peace of mind is a very important factor for any investor and gold gives that sense of security to the investor. not all things we buy give valuable returns. most of the things we buy are emotional purchases, which in turn make our life beautiful for us.

My mother who is 68 year old and simple housewife(only 12th pass and not chartered accountant) shared a simple thought with me. I would like all to read this.

value of 1 kg gold is sufficient for a reasonable marriage expenses and 2kg gold can fund a lavish marriage. THis was true in 1971 when gold was Rs. 250/10 gms, again was true in 1987 when gold was 4600/10 gms, was gain true in 2000 when gold was 6000/10 gms and is true even today when gold is around 28k. Period.

REPLY

hasmukh

In Reply to pawan 4 years ago

Gold is good but not for investment.The persons who benefit the most are the Jewellers' community, who make lot of money at all times : when you buy gold or when you sell it. and you are not assured of the full money. Security is never guaranteed as when one sells gold ornaments, he may face deficits in the form of labour charges, impurities etc.

pawan

In Reply to hasmukh 4 years ago

1. Who is to decide whether gold is good to buy or not. Anybody who buys gold is happy. Anybody who has gold is happy. It is only the experts who crib about it. Try gifting your family some gold and see their reaction.

2. Food & Beverage Industry and Clothing industry has higher margins than jewelry industry. It means one should stop buying food articles and clothes and live without these. why do people worry about the businessmen's margins. why dont you get into details of the risk a jeweler or any other businessman carries in his business. If not convinced, try getting into one.
3. Gold and jewelry are two different products. Investment is talked about in Gold and not jewelry. One has to understand the difference.

Enquire role of Bansal in promoting Mahesh Kumar as Railway board member, demand activists


Following the arrest of Vijay Singla, the nephew of railway minister Pawan Kumar Bansal while accepting a bribe, activists have demanded an enquiry of the promotion and transfer process of the Indian Railways

Following the arrest of Vijay Singla, the nephew of Railway minister Pawan Kumar Bansal, activists have demanded an enquiry into the promotion of Mahesh Kumar as member of Railway Board as well as the role played by the minister.

 

Mumbai-based activist Samir Zaveri has been sending letters to the prime minister and railway minister as well as Railway Board to dismiss Mahesh Kumar for failing to detect several frauds when he was heading the vigilance team at Western Railway in Mumbai.

Similarly, Lucknow-based social activist Dr Nutan Thakur has demanded that in the light of Pawan Bansal’s nephew episode, the Central Bureau of Investigation (CBI) should also enquire into railway officer Mahesh Kumar’s recent promotion to the post of Member, Staff.

 

In her letter written to director of CBI, prime minister and secretary, ministry of personnel, she has said that now there is an immediate and imminent need to look into Mahesh Kumar’s promotion process from general manager of Western Railways to Member of the Railway Board.

 

Suggesting to treat the entire episode in two distinct stages—promotion from GM to Member from Staff and attempted change to Member from Electrical, Dr Thakur has demanded to act against all those, including the railway minister, involved in the previous decision-making of promoting Kumar from GM to Member, Railway Board, in case circumvention of rules and foul play is found there.

 

On Friday, the CBI arrested Vijay Singla, nephew of railway minister Pawan Kumar Bansal, for allegedly accepting a portion of the Rs90 lakh bribe to ensure the appointment of a Railway Board member.

 

The agency also registered a case against three other people—including the accused member (staff) Mahesh Kumar who had taken up his position on the board only a day earlier—after conducting raids in several cities.

 

Singla, son of Bansal’s sister and one of the leading businessmen in the region, was picked up by a CBI team from New Delhi on Friday evening.

 

Singla is accused of accepting the money in return for ensuring that Kumar, a 1975 graduate from University of Roorkee who had been the general manager of Western Railway, would be appointed to the Railway Board, which the ministry announced on 2nd May.

 

According to Zaveri, Mahesh Kumar as chief of vigilance at Mumbai failed to detect and take any action on several frauds in his jurisdiction. “It is open secret that there is a price for getting selective transfers and promotiona anywhere in the Indian Railways from top to bottom. I had sent several requests through emails with supporting evidence to the President of India, the prime minister and others to investigate into the transfer and posting scams in Rail Protection Force at Central Railway as well. However, there is still no action,” he said.

 

Zaveri said, during Mahesh Kumar's tenure as head of vigilance at Western Railway, the CBI raided a divisional railway manager (DRM) from Ahmedabad and found Rs80 lakh in cash, one kg of gold and 30 wine bottles (prohibited in Gujarat) subsequently arresting him. Citing media reports, Zaveri claimed the CBI was more active in detecting frauds and arresting railway officials than the WR vigilance department headed by Mahesh Kumar.

 

Incidentally, Subhodh Jain, general manager of Central Railway, was also promoted recently as member of the Railway Board, Zaveri pointed out.

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COMMENTS

CA PRADEEP AGARWAL

4 years ago

You have to enquire from has this rot started, take away all Discretionary Powers and make them simply caretakers, and in case any corruption is found confiscate properties of all near and dears

CA PRADEEP AGARWAL

4 years ago

MY DEAR TELL ALL OF YOU, THAT THIS IS ONE OF THE MOST CORRUPT GOVT I HAVE EVER SEEN, AND HOPE SO WILL NOT SEE IN FUTURE.

Jolly Good

4 years ago

Why is it that still GM of Western and Central Railways not posted.Why is this practice of GMs not giving powers to Additional General Managers when they are away or retired ?If Railway Board Confidential Cell and the Advisor Confidential do a honest job , then why the next Person who is in line for promotion become GM irrespective of his choice of the Zone or Unit?There is no refusal of promotion to Mr Mahesh Kumar who was not interested in becoming Member Staff but an adjustment is made to accomodate him in Railway Board.Why some other junior officers of his cadre have to forego promotion when unable to carry out transfer to North Frontier Railways?Why some officers of his community never left their parent Railway even till 23 to 25 years of posting?Why certain officers are branded not fit for post of Branch Officers,ADRMs ,DRMs or GMs?Why is there so much subjectivity in Annual Confidential Reports which overrides the Objectives and Targets met ?It is anybody's guess that unless you are a mini Mr Mahesh Kumar in Government Organisation you are denied an financially influential or administratively important posting.Can CBI now look into this and prove they are worth their salt?

CA PRADEEP AGARWAL

4 years ago

NOT ONLY MR MAHESH KUMAR, THERE ARE SEVERAL MAHESH KUMARS WHO GET COVETED POSTS THEY DESIRE WITH THE BACKING OF POLITICIANS. WHAT DO THEY GET IS ANY BODY'S GUESS? IN STATE AS WELL AS CENTRE? PLEASE COMMENT.

Jolly Good

4 years ago

Enquire Role of Mr Mahesh Kumar in Promotion,Posting and transfer of his subordinate officers dealing in Signal and Telecommunication contracts both in Open Line and Construction organisation in Western Railway. Mr Mahesh Kumar elevated a junior officer Mr Ravi Agarwal of a particular Batch as co-ordinating Head of Signal Telecommunication Construction Organisation in Western Railway when till recently none of his other Batchmates got promotion in other Railways.This is just tip of iceberg.Mr Mahesh Kumar followed the footsteps of Mr Pawan Kumar Bansal and then his Juniors follow his footsteps.We should really thank Mr Mahesh Kumar for letting the whole nation know the rot in Railway Organisation .It might be similar in other ministries too but till recently CBI was a parrot and Mr Ranjit Sinha- may his tribe increase was courageous enough to set the ball rolling in own department!!!We expect more news on this ,IPL rot should not overshadow this genuine work of exposing undertaken by media.

REPLY

CA PRADEEP AGARWAL

In Reply to Jolly Good 4 years ago

NOT ONLY IN RAILWAYS BUT EVERY WHERE YOU WILL FIND THE SAME? YOU HEARD ABOUT CMD OF AIR INDIA, WHAT HE DID, EVERYBODY KNOWS IT

CA PRADEEP AGARWAL

4 years ago

It might be going in other Organisations also where there are such type of members, not only Railways? Can open up a Pandora's box in corruption, which is why Minister's are not able to rein in their senior officials in the Dept., and wanted to shield them from Jan Lokpal Bill?

Jolly Good

4 years ago

There is no separate Member for Signaling & Telecommunications and Electrical .So in the race of one upmanship in Railway Board,Mahesh Kumar aped his predecessor ;Narain Rao Manjunath betted on a winning horse probably what Mr Kulbhushan could take for a deal, Mr Mahesh Kumar had a competitive bid therefore not wasting time and fearing after becoming CRB ,Mr Kulbhushan would keep the ML portfolio to himself like the present CRB keeping the post of MT to himself.In the vicious circle certain relatively honest officers would be trounced upon,was of no concern to the trio.All of them are relatively honest or at least made out to be unless caught red handed.The desire to be First Among Equals led to Mahesh Kumar's Downfall.There are Humptey Dumptey Sat on a Wall,Humptey Dumptey Had a Great Fall.There are seven green bottles(read Members) standing on the wall(read Board).If one green bottle would accidently fall, there are six green bottles standing on the wall .It remains to be seen what happens to rest of Hoity Toity Bottles.Guess who had the last laugh?

PRABHAT

4 years ago

INVESTIGATION MUST BE DONE AGAINST OTHER SITTING / RETIRED MEMBERS BECAUSE THERE MUST BE SIMILER CASES IN PAST ALSO DURING THE RESUME OF OTHER RLY MINISTERS .

PRABHAT

4 years ago

WE MUST THINK - WHAT ARE UNDUE BENEFITS FOR A MEMBER OF RLY BOARD THAT ATTRACTS SUCH HUGE BRIBE . FURTHER CAN A RELATIVE OF MINISTER CAN ASSURE FOR THE POSITION OF MEMBER , WITHOUT THE INVOLVEMENT OF MINISTER ?
THE PRESENT AND PAST MEMBERS MUST BE SEARCHED TO FIND OUT THEIR ACCUMULATED WEALTH AS MEMBER ?

Sensex, Nifty may give up some gains: Weekly Market Report

A fall below the low of 5,868 on the Nifty may mean that a new phase of decline has started

The market ended the holiday shortened week on a positive note as investor sentiment was boosted by better-than-expected corporate results and hopes that the Reserve Bank of India (RBI) will cut key rates in its annual monetary on Friday. Signs of a revival in the global economy, after the US reported good macro-economic indicators, also aided the gains. Investors will now shift their focus on fund inflows by foreigners and news about the progress of the monsoon rains, a key indicator of growth.

 

The Sensex closed 289 points (1.50%) higher and the Nifty finished the week at 5,944, up 73 points (1.24%), making it the third weekly close in the green. A fall below the low of 5,868 on the Nifty may mean that a new phase of decline has started.

 

The market closed in the positive on Monday on support from consumer durables and fast moving consumer goods after FMCG leader Hindustan Unilever’s results beat market expectations. The benchmarks closed higher on Tuesday as gains in the FMCG sector continued for the second day. The bourses were closed on Wednesday for May Day.

 

Hopes of a rate cut by the RBI in its annual policy announcement saw all-round buying, resulting in the market closing near its three-month high on Thursday. The market snapped its three-day winning streak on Friday after the RBI sounded caution saying that there is “little room” for further policy easing.

 

BSE FMCG (up 8%) and BSE IT (up 5%) were the top sectoral performers in the week while BSE Bankex (down 1%) was the lone loser.

 

Hindustan Unilever (up 23%); Wipro, Sterlite Industries, Mahindra & Mahindra (up 8% each) and Infosys (up 4%) were the top performers on the Sensex. The chief losers were Bajaj Auto, GAIL India, Tata Motors (down 4% each), State Bank of India (down 3%) and Cipla (down 2%).

 

The key gainers on the Nifty were HUL (up 23%), HCL Technologies (up 10%), M&M (up 8%), Reliance Infrastructure (up 7%) and Sesa Goa (up 6%). Bajaj Auto, GAIL India (down 5% each), Punjab National Bank, Tata Motors (down 4% each) and SBI (down 3%) were the main laggards on the benchmarks.

 

The RBI, in its annual monetary policy released on 3rd May, announced a 25 basis point cut in the repo rate to 7.25% but kept the cash reserve ratio (CRR) unchanged at 4%. In the macro economic report released Thursday, the RBI said it had “little space” for cutting interest rates as it tries to maintain a balance between growth and inflation.

 

The HSBC Manufacturing Purchasing Managers' Index (PMI), a key indicator of manufacturing growth, fell for the second straight month in April, declining to 51 from 52 in the previous month. The reading for April was the lowest since November 2011.

 

The core sector production of eight key industries rebounded with a 2.9% growth in March 2013 from a negative (-) 2.5% growth registered in February 2013. The growth was mainly on account of buoyancy in the production of cement and steel and a marginal increase in electricity generation.

 

In the corporate scene, Hindustan Unilever, one of India’s leading fast moving consumer goods (FMCG) company, reported 12% year-on-year (y-o-y) increase in net sales to Rs6465.81 crore for the quarter ended 31 March 2013. Likewise, its net profit is up 14.65% y-o-y, and touched Rs787.20 crore for the March 2013 quarter. This was driven by strong performances in domestic consumer business as well as home and personal care divisions.

 

This apart, HUL’s parent company, Unilever Plc, has announced a buyback of roughly 487 million shares, or 22.52% of the share capital, through an open offer. The buyback will take Unilever Plc’s total shareholding to nearly 60% and thereby gaining firm control over HUL and its decision making activities.

 

In international news, US stocks closed out the week with good gains as Wall Street cheered a better-than-expected April non-farm payrolls report. US employers added 165,000 jobs in April, while the unemployment rate fell to a four-year low of 7.5%. But the unemployment rate remained well above the 6.5% level at which the Federal Reserve has said it will start raising interest rates.

 

On the flip side, the rate of growth in the US services sector slowed in April, hitting its weakest pace in nine months. And factory orders saw their biggest decline in seven months.

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COMMENTS

NSriramamurty

4 years ago

I Think, Nifty future Can be Short Sold at 5990 to 6010 with Stop Loss of 6060 with TP of 5800, as it may be Double Topped there, in this Volatile Market.

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