E-Gold and E-Silver from NSEL

by Manshu on January 13, 2011

in Investments

This is yet another post from the Suggest a Topic page, and this time we’re going to look at the E-Gold and E-Silver series from NSEL (National Spot Exchange Ltd.)

NSEL enables you to buy gold, silver and copper in electronic form, and hold it in a Demat account.

This opens up another avenue for people interested in buying metals electronically, and now you have another option in addition to gold ETFs, and trading in the commodity exchange.

An Overview of buying E-Gold, E-Silver or E-Copper through NSEL

Opening a separate Demat and Trading account for trading in NSEL

First of all you will have to open a Demat and Trading account with one of the authorized participants with NSEL.

This has to be a separate trading account from the one that you might be using for trading stocks.

There is a list of authorized depository participants (DPs), and you can open an account with any of these to start trading in NSEL.

You can expect to pay an initial charge of about Rs. 350 or so for opening the Demat account depending on who you open this with, and then expect a slightly lower AMC (Annual Maintenance Charge) of about Rs. 250 or so every year on this account.

Some DPs might offer you a scheme where if you give them a refundable deposit of Rs. 2,000 they will waive off the opening charges, and subsequent AMC, so you can check that up.

To open an account go to this link and look up a member in your city, and talk to them.

You will require documents such as PAN, 3 passport photographs, bank proof, and address proof.

Buying E-Gold, E-Silver or E-Copper through NSEL

Once you have your account set up, you can then carry out transactions. You can buy gold, silver or copper, and one unit of the E-Series is equivalent in the following way:

1. E-Gold: 1 gram

2. E-Silver: 100 grams

3. E-Copper: 1 kilo

The commission to transact is about 0.5% if you take the delivery, and 0.05% for intra – day trading. I use the word about because these might differ from one broker to the other, and I wanted to give you gauge of what you can expect.

You can trade the E-Series from 10:00 in the morning to 11:30 in the night on weekdays, and the settlement is done on a T+2 basis.

The price of the three contracts is visible on the website of NSEL, and once you buy a contract, it will be credited to your demat account after settlement.

Converting E-Gold, E-Silver or E-Copper in Physical Form

You can hold the E-Series products in Demat form, and you also have the option of converting it into physical form – this is known as rematerialization.

There are two key things to note here:

1. Rematerialization is currently not done in every city, so if you need this option, then check with the agent first.

2. VAT: When you rematerialize you will have to pay some rematerialization charges (which will be in the range of Rs. 200 for 10 grams gold), but the VAT might be a bigger amount based on how much electronic quantity you hold.

Currently, there are no holding charges, but I don’t know how far this will continue, so you can expect to pay holding charges sometime in the future, if not immediately.

Information I couldn’t find on E-Series Products

There were a couple of things that I wanted to find out, but wasn’t able to get to, and I thought they were meaningful enough to be shared here, and see if anyone else knows about them.

Does SEBI regulate these E-Series Products?

If someone faces an issue with NSEL, or the E-Series products, then who should they address it to. Can they go to SEBI? Is SEBI actively regulating it or does it fall under the purview of some other agency.

Does anyone hold the underlying physical gold?

Gold ETFs hold underlying physical gold equivalent to the number of units of funds they have issued, and they publish the data periodically, but I didn’t find information on who holds the physical gold, or if at all it is being held at somewhere at all times.

If everyone who holds a E-Series contract requests for gold rematerialization then what will happen.

Conclusion

There are no silver ETFs right now, so this is an alternative if you’re looking to invest in silver, but there are gold ETFs that you can look at if you’re looking to invest in gold.

This product doesn’t have a long track record, so even if you are interested in buying E-Gold or E-Series – I’d say it’s better to be safe than sorry, and start off with smaller quantities.

{ 32 comments… read them below or add one }

sridhar January 10, 2012 at 11:18 pm

can we get physical delivery of gold if we purchase it thru MCX ? In MCX is there a concept called ‘ spot exchange ‘ ?

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SUBHADIP ROY January 15, 2012 at 10:15 am

I just want to share the following information. NSEL is governed by three regulatory bodies viz. Forward Market Commission (FMC), State agricultural marketing board(SAMB) and Warehouse Development Regulatory Authority (WDRA). It is not regulated by SEBI.

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krishna February 14, 2012 at 8:13 pm

Dear Sir,
What is the difference between Gold ETF & E-gold.

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Prabhakaran May 5, 2012 at 8:24 pm

If someone has already answered your query, please ignore this.
Simply put, Gold ETF is PAPER GOLD and E-Gold is GOLD in physical form. Gold ETF can be traded like any other scrip. With E-Gold, you can either take delivery in physical form or sell it to the bank itself. There are, of course, charges which Shri Manshu has described in his article.

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Umesh May 16, 2012 at 7:06 pm

EGold is also a form of paper gold and it is not necessary to take delivery in physical form. One can keep it in paper form in his demat account as along one wish to keep. One has a choice to convert eGold in physical gold, if one wants, by following the procedure laid down by NSEL and paying the necessary charges.

Now some gold ETF can be converted into physical gold, the example is Motilal Oswal MOSt Shares Gold ETF.

You can not sell eGold to bank as you have mentioned, as no bank is authorised to purchase it.

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Krishna June 15, 2012 at 2:07 am

Can Gold ETFs be sold to banks?

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Manshu June 15, 2012 at 4:35 am

No, but you don’t need to do that either. You can sell them on the stock exchange any time. Why do you want to sell them to a bank when you will be buying them from a stock exchange?

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manikanta March 15, 2012 at 11:51 pm

what are the charges to convert 1kg of silver in to physical form detailed

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Govind Prasad Gupta April 13, 2012 at 10:15 am

I want buy e-silver but I want know that any time limit is sell to e-silver such as MCX
or Not any time limit. What we can e-silver hold with long time. What we can sell anytime.
Please request to you reply me.

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Umesh May 16, 2012 at 6:48 pm

Hi

There is no time limit to sell eSilver. You can hold it for long time and can sell anytime.

Purchase of silver at MCX is different, at MCX you are not purchasing silver but a contract to purchase silver in a stipulated time and so you pay only margin money and not the full value of the contract. To complete the contract you have 2 options either take delivery on the expiry of the contract or square off the deal by selling the contract before expiry (normally it is 5 days before expiry). Hence there is a time limit.

While at NSEL you are buying eSilver after paying full value and after purchase it is your asset and so no time limit to sell.

I hope you got the difference between the two options.

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dhami April 13, 2012 at 10:15 am

Physical gold is stored in warehouse in Laminton road, mumbai and its security is undertaken by international firm Brinks Arya ( Takes care of ATM money also for few banks) – Source NSEL website

However I did not understand following thing…
If I buy e-gold , there is someone who is selling e-gold.. but system should have e-gold in first place with person selling…so
“How is the physical gold initially deposited in the warehouse – Is it NSEL doing doing the purchase from market based on demand from buyers?

-Thx
Dhami

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Swagata Guha May 16, 2012 at 2:53 pm

I want to invest in silver in electronic form. So i want to open a demat account for that with one of the members of NSEL.As I am a long term investor.I want to buy units at every dip and want to keep it year after year. Can I do this.Or I have to sell it after a certain time???

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Umesh May 16, 2012 at 6:24 pm

Hi

You can buy and sell esilver as and when you wish. If you want to keep, you can keep it for year after year.

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Swagata Guha May 17, 2012 at 11:17 am

Hi,
Before starting the investment,I want to ask is this safe to invest in e silver , or e-gold such a way through NSEL?? As it is quite new to the market and still many people do not know about such invetment.
Regards,

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Umesh May 17, 2012 at 5:28 pm

I do not know what safety aspect you are talking about. And IMO, no one can answer, (to ones satisfaction), questions on safety aspect of an investment .

If it is about NSEL, you better visit the website of NSEL, http://www.nationalspotexchange.com to know more about NSEL.

If it is about risk involved with investment in Gold and Silver, no one can predict. These two commodities always used to be volatile but were more so in recent past. Some months back Silver was trading @ 73-74000 per kg (april 2011) and then dropped to 46-47000 (september 2011) and now 52-53000. Similarly in gold, there is a continuous wide movement in price since July-August 2011.

Further I may add that every investment carries some amount of risk. No investment is 100% safe or risk free. If you want to know more on risk visit following link, this is an article “15 Types of Risk that affect your Investments” written by Hemant, a financial planner and a regular writer on financial aspects. http://www.tflguide.com/2011/09/types-of-risk.html

IMO, One should invest only when one is completely satisfied.

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Swagata Guha May 18, 2012 at 9:14 am

Sir,
First of all, I would like to say that you didnt get me . I am not talking about the volatility of commodity prices and all that. Why should I? I was talking about the way of investing through “NSEL”.Normally there is a tradition of buying silver through shops(obviously there was no other alternative).And also in the above article” E-Gold and E-Silver from NSEL” it is written that “This product doesn’t have a long track record, so even if you are interested in buying E-Gold or E-Series – I’d say it’s better to be safe than sorry, and start off with smaller quantities”.Due to this statement I asked such question. I hope u have understood what I am saying Sir. Anywas Thank you

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Umesh May 18, 2012 at 2:37 pm

NSEL is an exchange (for commodity transactions only) like NSE, BSE (for stocks and shares) and MCX, NCDEX (for commodities) and these exchanges are set up as per prescribed rules and regulation.

I do not know anything about its track record etc.

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Paresh May 18, 2012 at 10:47 pm

Even if tomorrow NSEL packed their bags,they have to return margin money lying in the investors account and provide delivery of commodities to the investors.
Peoples are not much interested in buying gold-silver in demat form, probably because they can’t show e-gold to neighbors….unlike to jewellery’s.

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Swagata June 14, 2012 at 12:48 pm

Hi,
I went through the NSEL website and got a list of authorized DPs. But when i go through the mentioned DP’s website, there I couldn’t find any information about commodity investment throgh NSEL. Such information appears on their website:
• Equities & Equity Derivatives (NSE, BSE)
• Commodity Futures(MCX, NCDEX)
There they do not mention the name of NSEL anywhere.
Even I talked to one of such brokerage house, they even say that we dont know, we will gather information on these and let you know.
Is there any different term that they use for commodity investment through NSEL that I do not know & should ask to them????
Regards,

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Umesh June 14, 2012 at 6:45 pm

List of member of NSEL (go through this website for the members list of your city/state ) http://www.nationalspotexchange.com/SitePages/MemberListForAccOpening.aspx

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Paresh June 18, 2012 at 2:02 pm

Problem is that brokers are looking to promote MCX business only as it is future market and lead to very high turnover with low margin amounts.Most of the houses may have started NSEL as it can run alongwith existing infrastructure..Very few are interested in promoting NSEL as overall turnover and incomes are mere peanuts..so possibly,one can’t find much information about NSEL on brokers or DP website.

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Arvind September 8, 2012 at 9:36 pm

hi,
I am dealing Gold & Silver jewellery’s shop sometime i have not time buy or sale and bear not a fix borkrage charges .So I want to know when i start buy or sale E-Gold ,E-Silver when it will up in prices then i would wait someone who would rady to buy in up priceing or nothing worry about it.or NSEL will take-care it, i have not knowldge ..

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Gaurav Bansal September 14, 2012 at 8:48 pm

I *sniffed* a flying piece of information and am posting it for validation, if anyone knows anything about it. I was told that upon accumulating 8gms of e-gold, one can get a credit note kind of thing from MMTC in exchange of that 8gms (i.e. after remat’ing it). This credit note is just another way of taking physical delivery. It seems we can present this to any jeweller who sells MMTC products or go to a MMTC outlet. You can buy jewellery with it or convert it to cash at the rate running at the time of presenting it.

Anyone hear/knows about this?

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Manoj October 27, 2012 at 8:55 pm

Hi,
could anyone share why the price per gram of eGold (from NSEL) is higher than the price at MCX? what are the different factors which increase the price of eGold units from that of MCX price.
Thanks.

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Sriram October 28, 2012 at 5:13 pm

Hi Manoj,
There are plenty of occasions when spot price of gold (e-gold price) will be greater than future price of gold, it would imply that in the short term the gold market is bearish on the price of gold, unless there is some fresh economic data that changes the market sentiment.
Overall there are macro economic, micro economic, geological factors that influence the price: e.g,
US releases the FOMC data (Federal reserve) in a planned date every month that tells if they would modify the interest rates of borrowing, would they indulge in quantitative easing, etc. Similarly Europe too there would be data pertaining to Euro zone bonds sale for Germany, Spain, France etc and whether they would raise or diminish the interest rates.
In India there is a festive season and hence it is likely that there is a demand for gold in the short term. If there are huge reserves of Gold reserves/there is an acute demand for physical gold by Central banks it would impact the price of gold accordingly as and when the news is released in the market.

Overall it is the superimposition of all these economic data that results in a price impact in Gold. Please note, this is purely per my limited assessment of how the markets have reacted to the price of gold and I am sure there are plenty of finer details that I must have omitted.

Sincerely,
Sriram

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krishna January 13, 2013 at 6:31 pm

is tds applicable on the sale of e gold ?

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Anshuman April 6, 2013 at 7:49 pm

Dear Manshu,

In your article above you have said that E-Series (gold, silver..) are new products and since there is no track record so we should be careful and invest in smaller quantities…

I thought these are only demat form of actual metals and the person buying it has full right to the bought quantity of gold/silver which is stored with NSEL…

Request you to elaborate what kind of risks you are referring to..

Thanks

Anshuman

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Manshu April 9, 2013 at 5:34 am

Dear Anshuman,

This article is a bit old and at that time these products were fairly new and had a lot of questions unanswered. Now, there is better knowledge about them, and people have also converted them to physical gold, so some of the things I had written at the time are probably no longer valid.

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Nikhil May 13, 2013 at 9:45 pm

Please give me detials how can i start? What is the process?

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Umesh May 13, 2013 at 11:41 pm

Hi Nikhil
It is very simple.
Do you purchase/invest in shares. It is just like that.
Otherwise, let me explain.
Just contact a broker, who is a trading member of NSEL and ask for an account opening form (link for list of brokers has been posted by me above OR visit NSEL website, it is available there).
Fill the application form and send it to the broker along with documents required, to open trading account and demat account and you are done.
The broker will open your account in 5-7 days or so, and you can invest for e-gold, e silver and other e-commodities online or offline as the case may be.
But take care, as not many brokers are dealing with e-commodities, the brokerage is very high.

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Umesh May 13, 2013 at 11:47 pm

I shall be thankful if someone, who is already investing in e-gold, e-silver etc., let us know about the brokerage and other charges they are paying.
Please do mention whether you are investing online or offline and the trading platform if investing online.
Thanks

PS
If someone though not investing, have the above information, please do share.

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Umesh May 14, 2013 at 12:03 am

Following is the link for members of NSEL, (to open a trading and demat account with them)
http://www.nationalspotexchange.com/NSELuploads/AccountOpening/Memberslist_DP.pdf

Reply

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