This post is extracts from my post at http://www.jahajee.com/bullion-investment-in-e-gold-and-e-silver/81/0.html . For full details please follow the link.
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.
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
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.
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 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.
