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Bullion Investment in e Gold and e Silver

2.57 K Views | Rishi Kashyap | 2 FOLLOW

    Bullion Investment in e Gold and e Silver


    In this Post I will try to explain about e gold, e silver and Bullion Investment in e form. For other type of investment Opportunities please refer my previous post of :

    What is Bullion Investment ?
    Bullion Investment is investment in Precious metals like Gold and Silver. These are to be traded for its value as gold / silver and not for any added value like jewelry or collectable coins. Theoretically speaking it included only Ingots but these days it practically includes Gold, Silver in various Forms.

    Why should you do Bullion Investment ?
    • To tell the truth Bullion Investment should only be done to diversify your Investment Portfolio. Over very long span Gold does not beat Inflation. It is only within last 4-5 years that they have gained great momentum.
    • Bullion Investment is not very rewarding but it seems assuring.
    • It preserves value when national currency is loosing value.
    • Gold itself is a currency, not just another commodity. Gold, Silver are not created by Government thankfully.
    • Gold improves the stability and predictability of your portfolio returns.
    • Adding gold to a portfolio introduces an entirely different class of asset.

    Rishi Kashyap | | EDIT | REPLY

      X National Spot Exchange Limited (NSEL) and Spot Trading ?

      If you talk about Merchant Navy then you need to tell about DG Shipping too, so here too e-Gold and e-Silver details are incomplete without details about National Spot Exchange or NSEL.

      What is spot exchange and spot trading ?
      Spot trading is where one buys and sells goods / commodity ‘on the spot’ of a defined quality just as we make purchases from a shop by paying cash. Spot trades are the opposite of futures contracts, which usually expire well before any physical delivery. For more details please check http://www.nationalspotexchange.com

      What is NSEL ?
      National Spot Exchange Limited (NSEL) is a national-level, electronic spot trading platform for commodities.
      National Spot Exchange (NSEL) in 2010 introduced investment products in commodity in Demat Form. In the same year NSEL also launched e-series of investment like e-Gold (17 March 2010) and e-Silver (21 April 2010). E-Series products were launched for small retail investors to invest in physical commodities (e.g. Bullion) in smaller denomination in Demat form (read electronic form). This kind of Bullion Investment is similar to Equity Investment.

      Which all products are traded on NSEL ?
      Commodities traded on National Spot Exchange include agricultural commodities, bullions and metals.
      NSEL has also introduced e-Series of investment products like e-Gold, e-Silver, e-Copper (and recently e-Zinc) to attract retail investors. In this post we cover only e-series of Investment Product.
      NSEL is planning to introduce some Industrial products too in near future.

      What are e-series of Investment Product ?
      These investment products allow investors to buy / sell commodities in demat form and hold them in their demat account. E-Series products provide opportunity for intra-day trading, coupled with demat delivery in respect of positions outstanding at end of the day. It deals with both Cash and Margin investment.
      NSEL has launched e-Gold, e-Silver, e-Copper and recently e-Zinc. NSEL plans to launch around 20 products under e-Series by December, 2011.

      Rishi Kashyap | | EDIT | REPLY
        X e-Gold / e-Silver Investment on NSEL

        All right finally lets talk about the e-gold and e-silver Investment.

        What is e-Gold and e-Silver ?
        e-Gold or e-Silver is Gold or Silver in Demat or electronic form. Dematerialization of Gold / Silver means storage of e-Gold / e-Silver in NSEL designated vaults/ warehouses and keeping record of its ownership in electronic form.
        The legal and beneficial owner of them gets a credit in his account electronically, which is similar to holding a pass book in the bank. Similarly, transfer of ownership against buy and sale is done from one account to the other, just like money transfer through a cheque.
        The depository keeps records of holding and transfers in electronic form. The opening of account and transfer instructions are carried out by the agents of the depository, which are called “Depository Participants (DPs)” or more commonly known as Brokers. When you hear about India Infoline, GeojitBNPParibas or ShareKhan then you are talking about these DPs.

        why is e-Gold and e-Silver better than physical Investment ?
        Reasons they are better than physical bullion Investment :
        1. Open market pricing of e-Gold / e-Silver while gold price of physical bullion varies from Jeweller to Jeweller.
        2. No risk of impurity in e-Gold / e-Silver while risk of Impurity may exist in physical gold / silver.
        3. Security of e-Gold / e-Silver is taken care by NSEL while for physical gold / silver its your own responsibilty.
        4. e-Gold / e-Silver can be easily bought, stored and sold while physical bullion requires physical movement and transfer.

        e-Gold vs Gold ETF ?
        • While mostly the national and International Bullion market are inter related but e-Gold price is linked to Indian Gold pricing while Gold ETF prices are governed by International Gold Price.
        • Annual Recurring Expenses (Storage, Insurance and AMC) is lesser for e-Gold than Gold ETF.
        • NSEL Website also compares the return in Investment in both of them from March 2010 (Launch of e-Gold) to Nov 2010. During this period e-gold gave 22.91 % returns on your Initial Investment while Gold ETF had 20.65 %.
        • In my opinion none of this matters a lot and in terms of investment,they might just be the same. However in India you do not have Silver ETF yet and e-Silver might be the thing for Bullion Investment in Silver.

        Personally I Invest in Gold ETF, e-gold and e-Silver all.

        How can you buy e-gold or e-silver as Investment ?
        If you intend to trade / invest in E-Series products (i.e E-Gold , E-Silver, E-Copper etc.) you are required to register with one of the members of NSEL. The process is exactly similar to client registration process for trading in the equity market. You may choose any NSEL member on criteria like convenience, comfort, service levels, safety, reputation and charges levied etc.
        You are also required to open a beneficiary demat account with any DP empanelled with NSEL.
        Thereafter, you can participate in these contracts either by making telephone calls to your broker or directly through online trading terminals.

        The most updated list of NSEL approved DP trading in e-series can be found at http://www.nationalspotexchange.com/Memberslist_DP.pdf

        Denominations in which you can Buy the e-Gold or e-Silver ?
        1 e-Gold unit Size is 1 Gram
        1 e-Silver unit size is 100 Grams

        Timings /details for trading in e-Gold or e-Silver on NSEL ?
        Trading in E-Gold /E-Silver as well as other contracts are available Mondays through Fridays from 10:00 am to 11:30 pm. Trading in E-Series products are not allowed on Saturdays and other holidays notified by the Exchange.
        Delivery Pay–in and delivery Pay–out in these contracts will be compulsorily in demat form.
        All contracts will be of single day duration trading. Sttlement is on T+2 basis.

        You have a Demat account for shares !! Do you still need to open another Demat Account ?
        Yes, You need to open another Demat Account. Your Equity Deat Account is different from Commodity Demat Account.
        In a Commodity Demat account, commodities are kept in electronic form just like equity in Equity Demat Account.
        However, if you have a demat account opened for MCX trading, the same account can be used for NSEL.

        How can you open a Demat Account ?
        A commodity demat account can be created exactly in the same manner as an equity demat account.

        1. Select a Depository Participant (DP) from the list of DPs empanelled by the National Spot Exchange (NSEL). This can be found from nsel website http://www.nationalspotexchange.com
        2. Once you have selected your DP fill their Account Opening Form.
        3. Submit the duly filled form to the DP along with the other required documents such as proof of identity and proof of address etc.
        4. Sign the agreement with the DP.
        5. The DP will open the client account and inform the client within a week’s time.

        The charges are notified by the DPs to all the clients holding beneficiary account with them. The DPs normally charge Annual Maintenance Charge (AMC) and transaction charges on all debit instructions. It is similar to the practice followed in equity market.

        Which type of Demat account do you need ?
        There are two types of Demat account for commodities : Beneficiary and Pool Account. You need to have Beneficiary Account.
        • A Beneficiary Account is an ownership account. This is an account opened by retail investors/ clients like us, to hold their commodities in dematerialized form with a depository.  A beneficiary account holder is legally entitled for all rights and liabilities attached to the commodities held in that account. The holder/s of commodity in this type of account owns those commodities. It is similar to the bank account.
        • A pool account is a transitory account. The commodities in these accounts are held for a commercial purpose only. A pool Account is opened by a broker or a Clearing Member of the exchange for the purpose of settlement of trades.

        What is the difference between delivery in physical form and delivery in demat form?
        In case of physical delivery, You get a warehouse receipt in paper form, while in case of delivery in demat form, you get a credit entry in your demat account.
        Please note that E-Series of contracts launched by NSEL are compulsory demat contracts and not physical delivery. You can later convert to physical delivery once the purchased e-Gold / e-Silver is credited in your Demat account.

        Can you get the e Gold or e Silver in Physical form ?
        Yes you can.
        NSEL provides an option to take physical delivery of specified lot / denominations at specified locations only, where NSEL has made vaulting and delivery arrangements. Presently delivery of physical e-Silver or e-Gold is available at Ahmadabad, Mumbai and Delhi only but NSEL is planning to expand the number of Delivery centers in future.
        At present, the physical delivery of e-Gold is allowed in terms of 8 grams, 10 grams, 100 grams, 1 kg and any combination thereof. e-Silver will be made available in multiples of 100 grams, 1kg, 5kg and any combination thereof.

        How can I take Physical delivery of e-Gold or e-Silver ?
        • For the purpose of physical delivery, you need to submit a delivery instruction slip (DIS) to your DP along with the  Surrender Request form (SRF).
        • The DP, thereafter, shall  transfer the units to the account of NSEL based on DIS. DP should also attest your signature on the transfer request form (TRF) and handover the same to you along  with the acknowledgement of DIS Slip.
        • You need to submit DIS and TRF to NSEL specifying the Delivery center of your choice from where you intends to take delivery.
        • On receipt of the copy of DIS and SRF, NSEL shall compute charges relating to making and packaging charges of coin / bar, Delivery charges, VAT and other dues, if any. NSEL will communicate the total amount due to you through the Email ID provided in the TRF.You shall deposit a cheque of requisite amount favouring “National Spot Exchange Ltd” with the vault.
        • After collecting such cheque, the vault will hand over delivery of Silver / Gold to You.

        In short it is complicated and to be avoided as far as possible.

        Do you need to pay any extra charges for Physical Delivery of e-Gold or e-Silver ?
        If you opt for conversion of electronic units to physical units, you will be required to pay fixed Conversion charges, Delivery charges, Storage Charges, VAT/ GST, as applicable on that date plus local taxes such as Octroi, applicable at the place of delivery. You can lift the commodity from the designated Vault after 7 days and within 15 days from date of submission of the request. In case of non-lifting of the delivery within 15 days, you shall be liable to pay storage charges for the entire month.

        How can I sell the e Gold or e Silver ?
        If the e-gold or e-silver is in Demat format you can sell them exactly like you sell your shares. You can ask your DP to quote a selling price for the units you hold and if the deal completes you have sold your e-gold / e-silver Unit.

        For more details follow :

        Rishi Kashyap | | EDIT | REPLY
          X Re: Bullion Investment in e Gold and e Silver

          Hey Jahajee shipmate thank you for such a nice comparison.

          Can you help me choose a broker for egold suiting me.
          1.I will be trading few times but I would be investing about 10 lakhs total in egold.
          2.Of course I don't want my money to be lost in anyway.

          Thanks a lot.

          Ashish Rao | | EDIT | REPLY
            X Investing in Gold !!

            List of DP can be found at

            If you are only investing in Gold then I suggest going for Gold ETF itself as you do not need to open the Commodity Demat Account then.
            Your Equity Demat / Trading Account is enough for buying Gold ETF. Few Gold ETF in the market are : Reliance Gold ETF and UTI Goldshare ETF....there are other Gold ETF too and you can search moneycontrol.com for a full list of ETF.

            For Point 1 do remember this that gold has not proven to beat Inflation in very long span. Have vision of 2-3 years and do have a target set in mind and sell when you reach that and buy again at fall ....

            For point 2 well the truth is no investment is fail safe ....sure you will not loose all your money but the prices of gold too fluctuates and your profits / loss will depend on at what price you buy the Gold.....

            If you really are afraid to loose money then stick to FD and NSC its far safer...but its no fun that way ......;-)

            Rishi Kashyap | | EDIT | REPLY
              X Re: Investing in Gold !!

              1.No I don't have a demat account already.
              2.When I said I don't want to lose my money I meant due to broker's mistake.

              I've already seen that list but how do I choose from so many. Is the brokerage and service same for the NSEL account that'll simplify my problem of choosing a broker.

              Thanks shipmate

              Ashish Rao | | EDIT | REPLY
                X Which broker for Commodity Demat Account

                Just heard of Gold Funds ...actually NFO of some Gold fund was just launched...and my friend Aly and Self were talking about it ...
                      You see for buying ETF you still need an Equity Demat account and you cannot have a SIP kind of thing with ETF...so you can invest in these gold funds...I checked one of the gold funds asset allocation and they allocate 95% of fund in buying Gold ETF...the best part is that you can do a SIP in that e.g. monthly buying of gold funds at a particular date... Since you do not want to trade that much and also hold for long time I think this suits you well as you do not need to open the demat account too and its almost same as a Mutual Fund. Again I will suggest that moneycontrol will detail all the Gold Funds available (Mutual Funds) you can check their past performance too prior deciding in which to invest. The advantage of SIP too could be found from there ....

                      Now coming to your points .....
                For point 1
                I think you will need to open the Commodity Demat account...Most agents have almost same brokerage ...Some may have a bit less but then they have hidden charges...I personally never verified the Brokerage much since i too did not want to trade much in bullion, I did it to diversify my portfolio and hold for long.
                For point 2
                Noted you too do not trust the brokers much ...I am not sure but the e-service of the NSEL is not even an year old and hence most agents still are not able to give you a Web-portal for trading at your own and the affordable option is calling a broker and asking them to quote for you...(atleast my agent still does that and am not trading in bullion on internet). Still you can get runtime price from the NSEL website anytime and ask the brokers to act for you.

                For choosing the broker, like I said earlier ...I did not care much for the Brokerage. I was not interested in trading most of my bullion investment, I am planning to hold it long...I chose my previous broker only with which I had my equity trading Account...

                   Three thing to consider for choosing a broker according to me would be :
                1. Try to open your account only with those agents / broker whose office is in your city so that it is easier to contact them,
                2. The Broker/Agent should be renowned and old company and
                3. hence find the brokerage of only these few agents from their site and compare....

                Mate while I have tried to share all what I knew and searched before entering the bullion market please do not forget that I too am a mariner like you and very soon going to join back the ship ...I personally think that some agents with superior financial knowledge might help you better....also if you find any info which you think could be beneficial to any jahajee just post it here and share your Knowledge.....

                Happy investment and happy vacation

                Rishi Kashyap | | EDIT | REPLY

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