Gold: Glitters and more
Finance
Recently, the gold price touched its 6-month low while trading on Multi Commodity Exchange (MCX) in India, signalling many investors - old and new - to look at the yellow metal again.
So today, we take a look at the most liquid commodity on the planet, and deep dive into its investing perspective.
History of gold
Gold is often regarded as the first form of currency that humans used - even before tin, copper and paper bills. The shiny lustre of gold not only allowed it as an acceptable asset for currency but also elevated it to become one of the most liquid commodities traded due to its titanic reputation.
Understanding how gold works
Unlike other commodities - such as oil, grains, other metals, etc., - where supply and demand variables affect the price action and movement, this yellow metal works differently.
The price of gold works completely in tandem with the strength of the currency (Dollar mostly) and other equities - depicting strong negative correlations. The intuition “when faith in currency decreases, gold becomes shiny” is often followed globally.
Gold investments via physical delivery
Right from owning ready-made jewellery, to buying gold coins of 20 gm each, to investing in gold savings schemes that allow investment of a fixed amount with an option to encash equivalent gold at maturity - there are many ways to lay one’s hands on this precious metal which can be used for multiple practical purposes.
Sadly, buying gold in the form of jewellery for the purpose of investment might not be the best idea, as the value acquired after making charges (~10-15%) and other related margins only depreciates through transfer from one user to the next.
Gold Exchange Traded Funds (ETFs)
Buying ETFs is very similar to buying actual gold. The only difference remains in the fact that here the investor receives a paper note entitling them to a specific number of ETF units (in accordance with the purchase price), instead of transfer of actual physical gold. Driven by the change in actual gold prices - one may buy/ sell the note at its face value at any time on the MCX.
As compared to physical gold, ETFs hold the advantage of removing storage and making charges, thereby serving as a better investment tool.
Sovereign Gold Bonds (SGB)
SGBs are bonds issued by the government where, like ETFs, one doesn’t acquire physical gold, but gets exposure to the price movement of the metal. The advantage these bonds provide is that one receives tax exemption on any gains on maturity.
SGBs come with a lock-in period (mostly 5 years),- prior to which one can not redeem them directly. However, they can be sold on the stock exchanges via brokers. Though, SGBs are not as liquid as ETFs, in the open market.
Digital gold
Digital gold is also very similar to ETFs. However, in this case, instead of holding units of an ETF, the seller stores physical 24 karat gold in a secure vault, following a Gold Accumulation Plan (GAP) scheme. This allows one to make investments for as little as INR 1, which later can be realised into gold coins.
The scheme is provided under many popular payment wallets such as PayTM, GPay and PhonePe, allowing for a liquid and instant transaction, instead of through the ETF route where one is required to own a DEMAT account.
Should you keep gold in your portfolio?
Gold works as a hedge against inflation. This means that it is expected to perform better as compared to other asset classes in a recession. Gold acts as a safety net in one’s portfolio against idiosyncratic risks that can hurt badly.
An appreciable 10-15% of one’s portfolio should be in gold ideally - which would allow the investor a steady 8-10% yearly* return irrespective of the market conditions.
*historically-can be subject to change
A mental health pandemic to follow?
Health
WHO claims that a mental health pandemic is likely to follow the current coronavirus pandemic. Let’s have a look at why the agency claims this and how we can cope with it.
COVID has impacted all areas of life
This global health disease has proliferated from the domain of health onto the social and economic order in the world as well.
While those that have suffered the disease still suffer the after-effects of having gone through something so traumatic, those who have been safe yet, still fear and worry about losing their loved ones to it.
Further, the uncertainty of the economic world induces a fear of losing livelihoods, while those just starting out, worry about getting a job in the first place.
Mental well-being
Continued social distancing norms have made the lingering feeling of loneliness and seclusion the new normal while inducing anxiety among people for their physical and financial wellbeing. This has had a drastic effect on people’s mental well-being.
While conventionally understood as merely an absence of pathology, mental well-being is much broader than that. It is a holistic state of well-being on an emotional, psychological and social plane. i.e., encompassing how we feel, think and behave.
General factors that determine mental well-being
Broadly speaking, all factors can be clubbed into:
Socio-economic circumstances of an individual
Biological and genetic factors at play
Lifestyle choices
Environmental stressors
Covid has undisputedly altered the status quo ante, as we experience major lifestyle changes. The new normal constitutes a changed socio-economic order and added environmental stressors.
How to cope?
Staying socially connected: The guidelines say social distancing, not emotional distancing. Staying in touch with friends and family could strengthen the sense of being in it together and help you sail through this.
Taking breaks: A lot of us feel that our productivity is not what it seemed to be, it could be due to the stress that is already being exerted on our system. Recognizing that our body needs a break, and guiltlessly taking it, might as well improve the quality of our work.
Engaging in physical activity: This pandemic has made an already sedentary lifestyle, even more so. It is important to take out time to indulge in physical activity. This helps in regulating your bodily functions and prevents an imbalance.
Getting quality sleep: Sleep cycle disruptions are also very common and can be dealt with by following practices of sleep hygiene, like avoiding screens for an hour before bed, avoiding stimulants like caffeine afternoon, having an active lifestyle etc.
Doomsday surfing
Consuming news that distresses you, despite knowing the imminent distress it causes, is known as doomsday surfing.
This was especially noticed during the second wave when reading about rising cases and SOS on social media stressed people even more, yet they were unable to resist.
Be conscious of the amount of news you are consuming, not just about coronavirus but also other triggering news that might have a poor impact on your mental health.
How to recognize the need for professional help?
If you or someone around you has shown drastic and erratic changes in their:
Sleep
Appetite
Mood swings
Temper outbursts
Behaviour
Suicidal ideation
It is advisable to seek professional help for the same.
Seek help: Indian mental health helplines
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