Holding Gold Bond / Physical Gold and coming Financial Reset. Which is better?

26^th July, 2024

 

Holding Gold Bond / Physical Gold and coming Financial Reset. Which is better?

 

Dear Investors,

 

Namaste! Experts are of the opinion post budget that Government reduced the custom duty on Gold so that they don’t have to pay more money to Gold Bond Investors whose maturity is due in the August 2024. Their conclusion is funny. I was more surprised when the Billionaire investor also said the same view on his YouTube channel. 

 

Let me deal with the same in details.

 

On 5^th February 2022 – we wrote the following blog - Government-backed Schemes which are not supported by real assets. https://bestofhiteshparikh.blogspot.com/2022/02/government-backed-schemes-which-are-not.html

 

We have been ANTI GOLD BOND from the day one and you can read the logical analysis in the above post. We are of the opinion that GOVERNMENT is shorting the GOLD from 2015 to till now without 100% back up of Physical Gold. The advantage was seen in the incremental RBI dividend to the Government over the years. 

 

Our simple argument was – RBI bond is costing 7-8% per annum to the Government. Gold bond cost 2.5% and when the maturity comes – you issue new gold bond and pay the old. So, Government interest cost comes down 4.5% to 5.5% depending on the Bond rate. Current RBI bond rate is 8.2% per annum. So, government is saving 5.7% per annum and that is given back as incremental dividend. 

What about the Custom Duty reduction?

 

This is one time change. Government has to pay back till 2030 as per the current issue of the bonds. So, less payment to the August 2024 maturity is not the case. August 2024 maturity is just Rs. 2000 Crs something as per the Market cap of the August 2024 bond in NSE Site. The bond price has fallen from 7500/- pre budget to 6990/- while I am writing this blog today. It’s about 9% less. By the experts logic – Government is saving Rs.180-Rs.200 Odd crores in the maturity of August 2024 bonds. This doesn’t make sense for the Government. 

 

What about the coming Financial Reset and Holding of Gold Bond and Physical Gold?

 

From 2020 – I am hinting about the coming financial reset in the World. In the last post – I talked about likely GOLD Price Reset in the coming time. 

 

Now, let us visualise a scenario that Gold prices has come down to ZERO after 15 years or so. There is utter recession in the World and nobody wants to buy gold. You have GOLD BOND of 100 Grams and you have Physical Gold of 100 Grams. What will happen? 

 

Your Bond will be ZERO. But you still have 100 grams of physical Gold. Though you can’t sell in the market as the price is ZERO or nobody wants to buy. But, your family still can wear Gold ornaments. May be in next 10-20 years post the gold price resent - gold may regain the value and your future family can have that advantage of the gold you bought today in physical form.

 

International Gold Prices: -

 

Government can reduce the custom duty of Gold to ZERO, but they can’t control the international prices. Looking at the wars and economic situations world wide – Gold prices have more chances to go up than to go down. Say Gold prices has moved to USD 3000 or USD 4000 per ounce. Then, without Customs duty also the Gold Bond Prices will move up. At that time – if the government denies paying or compulsory renews the same – you can’t do anything. 

 

What is my simple understanding from BUFFETT?

 

Buffett has always said be GREEDY when others are FEARFULL and Vise Versa. If I apply the same logic -when the World is going for DIGITAL assets – you go for Physical Assets. 

 

In GURU TANDAV post we have predicated massive internet break down in 2025. Those who love the ONLINE / DIGITAL will have severe problems at that time. Last week Microsoft issues halted the Flights world-wide and affected some banks. What if the system stops or crashes massively in future and you can’t do anything? Have you thought about that? 

 

You are free to take your call. I am a 100% follower of Buffett. 

 

What NEXT?

 

Whenever you listen to any experts – do your own research after that. Whether it makes sense or not? After all, It’s your money. 

 

If you want practical help – you can approach us.

 

Follow me on Twitter @hiteshmparikh Or on Whatsapp - +91-9869425399.

 

Learn a Lesson. Live with Passion & Invest with Reason.

 

Hitesh Parikh.