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    Convert Black Into Gold !

    By

    January 25, 2014

    Black money, as the name suggests, is the money which is earned illegally, mainly in the form of cash. No official records for this so called ‘earned’ money exist and as a result you get a golden opportunity to evade the taxes. Mainly, such kinds of practices are carried by businessmen or traders. The only problem attached with this is (leaving the ethical ones behind) that you can use this money only in a purely liquid cash transaction. To make it simpler, this money is buried in your closets or stuffed in your mattresses, you cannot use it where you need to have a bank transaction (cheques, credit cards, online payments etc.)  For an example- you cannot use this money for buying a luxury sedan because all the down payments and subsequent installments have to flow out of your bank account.

    Another problem, there is no value addition to this stock of money as it cannot be officially used under the various lucrative investment schemes. Rather, considering the current trend, the ever increasing inflation will only help in depreciating its value down the line. I don’t think it’s worth to let your money lose its luster, so what do we do?

    The only probable solution that comes to my mind is to invest in gold. This is because you can easily exchange your black money with gold, something that we Indians really love. Indians are expected to buy nearly 1,000 tonnes of gold worth over Rs.49,500 crore. What’s behind this undeterred love for gold is that it’s “the asset class” which earns steady returns, offers high liquidity and also functions as a status symbol. The larger amount of gold you flaunt, the wealthier you appear. It also has religious connotations, which can be seen being pursued in full swing on the day of Akshaya Tritiya.

    Not to forget, gold is seen as the asset which never goes down in the long run. It has been the best performing asset class in the past five years, delivering annualized returns of 23.5% since March 2007. Gold has for long been considered a hedge against inflation. Jayant Pai, vice-president, Parag Parikh Financial Advisory Services, says, “Gold is an efficient store of value during uncertainty.” This is because the monetary policies of any government cannot manipulate the value of gold. It’s the medium of exchange which has no default risk, unlike other currencies. As a result if you invest your idle cash in gold, the risk of depreciation of the money’s value evades and in addition to that you add to your wealth a never disappointing asset which is easy to store just like the cash hidden in your cupboards or mattresses.

     

     

    Views presented in the article are those of the author and not of ED.

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