Gold has been bound between 26,000 & 27,000 on the exchange since quite some time. Now, to understand the investment in the commodity exchange and the benefit it brings, let’s assume that the gold is at 27,000 at this point in time.
Considering either a short or a long horizon, there are only 3 possibilities that can arise at any point
- Gold shall remain at current levels even in future
- Gold shall go northwards in future
- Gold shall go southwards in future
It is all a game of probabilities since, we cannot predict future. So we shall always feel the probability of Gold going up with less confidence in the short term then in the long term.
In the very long term we would safely assume with more that 99% confidence that gold will be more than what it is today. Hence, let’s assume a conservative scenario whereby, we expect gold to reach 28,000 by the end of one year from now. Gold may see highs of above 28,000 and even see lows within this year.
Now, if today we purchase 100gm of gold, the investment required shall be Rs. 2,70,000/-. When at the end of a year, as per our assumption, the price would have reached 28,000. Hence, we would have made Rs. 10,000/- on our investment of Rs. 2,70,000/- . Hence we had an ROI (return on Investment) as under
ROI = 10,000 / 2,70,000 x 100 = 3.70%
Now, let’s compare the situation with investing in Commodity Exchange.
In the commodity exchange, you need to invest only Rs. 25,000 (approx) as margin money to block 100gm of Gold. However, the profit / loss made on the investment are marked to market on real time basis. Hence your account is continuous credited / debited depending upon price movement.
However, let’s assume that we roll on the investment in 100gm of Gold in the commodity exchange for a year. At the end of the year when the market price is 28,000, our account shall be credited with a nett 10,000 as profit. Hence, in this case also the profit remains the same i.e. Rs. 10,000/-. However, this profit is now achieved on an investment of Rs. 25,000/-
This time the ROI is as under
ROI = 10,000 / 25,000 x 100 = 40.00%
Thus ROI through investment in commodity market is over 10 times in percentage terms with that of investing in physical gold / gold ETF or for that manner any other means of investing in gold as no front offers the commodity at such less margin money.
Now imagine the money that can be made in absolute terms when the entire 2,70,000 can get invested in the commodity market.
Interested in Investing in the Commodity Exchange - Click Here
No comments:
Post a Comment