We all know that physical gold is THE master asset class that you need to have in your investment portfolio. Apart from being a natural hedge to USD denominated assets, it also is a great store of value and is highly liquid globally.
Either at investment or retail level, it is a form of saving that has stood the test of time. Volatility is normal. There are buyers and sellers at each level. This is based on their needs of investing for the medium to longer term or liquidating the asset for immediate benefit.
Physical gold markets such as China, India, Turkey and the Middle East, to name a few, have a culture that embeds investing in physical gold, so they can keep it under their pillow. Not holding it in a bank, vault or notional forms such as Exchange Traded Funds (ETFs).
Whilst ETFs are popular and have exploded in demand during this crisis, it is not the instrument recommended for redemption of physical gold when needed immediately for liquidation.
In these markets, the old school mentality of holding physical is relevant and paramount. It is not just ancient tradition inherited from generations, it IS the standard acceptable best practice.
These markets are predominantly dependent on Jewellery purchases. And YES, they regard Jewellery as an investment product, not just a retail demand story.
It serves many purposes, one - the investment in physical gold, two - rather than sitting in a vault, it is used as an adornment of fashion, three - hand crafted Jewellery has a greater appeal for re-sale due to its creativity that enables to fetch a high price than the prevailing gold price, four - exchange of old Jewellery for new, where you only pay the manufacturing cost and not exposed to the prevailing gold price risk.
The fourth point is particularly interesting. It forms a basis for smart investment in gold Jewellery. What is recommended is, rather than using the traditional approach to buying and hoarding gold Jewellery, it makes a lot more sense to invest in physical gold bars and to then exchange the gold bars for converting to ready made Jewellery.
This is not a secret, but a well planned strategy. Firstly, the making charge of a gold bar is much lower than that of Jewellery. Secondly, exchanging gold bars for Jewellery ensures the price risk is hedged and neutral. You probably will pay the Jeweller a making charge with the physical gold itself, which is a very tiny portion of your gold bars value. So you don't need to dish out any extra cash.
Retailers and consumers are encouraged to smartly purchase various denominations of physical gold bars as per their requirements. Retailers can also benefit from the same strategy, buy 1kg gold bars of minimum 995 purity. We can help you reduce your business costs.
Think Covid-19. Think increasing savings. Please do keep safe.