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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 ?
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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 ?
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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 ?
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• 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 ?
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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 ?
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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 ?
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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 ?
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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 ?
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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 ?
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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?
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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 ?
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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 ?
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• 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 ?
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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 ?
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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 :
http://www.nationalspotexchange.com/
http://www.nationalspotexchange.com/eseries.htm?m=1
http://www.nationalspotexchange.com/Memberslist_DP.pdf
http://www.nationalspotexchange.com/%5CNSELuploads%5CResourceCentre%5CeSeries_Investment.pdf
http://www.gold-eagle.com/editorials_04/evans061304.html