Buying gold? Here’s how not to regret it

With Akshaya Tritiya on Sunday, gold buying is set to touch frenzied proportions.

The yellow metal is already sizzling at Rs 18,325 per 10 gram and is likely to gain Rs 1,000 per 10 gram from here in the next two months, according to Jayant Manglik, president, Religare Commodities.

But before you zero in on that gold coin or necklace, here’s a checklist to help you get the best value for your money.

Your jeweller isn’t the only one selling.

Several others are also selling gold, including retail chain Big Bazaar, India Post, various banks and even stock exchanges. Even though it is a Sunday, your bank gold coins and gold on the stock markets will still be available. Most banks have decided to keep select branches open on the day for selling gold coins and even silver coins.

“Gold is a major consumption category and Akshaya Tritiya is the second-largest gold selling day after Dhanteras. With us, there is a trust factor in terms of purity of gold,” says Sandip Tarkas, president - customer strategy at Future Group, which owns Big Bazaar. “The prices offered are at up to Rs 100 lower than the market rate on this occasion,” says Big Bazaar. The making charges on gold coins are Rs 35 per gram. India Post is offering a 6% discount on gold coins.

The premium charged on gold coins varies from counter to counter. Jewellers charge 1.9-15% premium depending on the size and brand, India Post charges a 21% premium, Big Bazaar offers it at an 8.98% discount and banks charge 5.25-19.5% premium.

Certification, bill and hallmarking…
Also, look for the BIS logo on jewellery and certificate for coins.

“On the bill, whether written or printed, see if the weight and purity and the value of gold is mentioned. If not, the bill has no value and you cannot claim in the event of being cheated,” says Vinod Hayagriv, chairman of All India Gems and Jewellery Trade Federation (GJF). Mandatory hallmarking for all jewellers was being mooted, but has been delayed now. “GJF is pushing for hallmarking to be made mandatory. Bigger jewellers are doing it,” says Hayagriv.

For those who wish to get their jewellery checked, there are XRF (X-ray fluorescence) machines in most cities. The bullion associations and jewellers association complexes, too, would offer these machines where one can check the purity of jewellery at a nominal cost.

Knowing the market price
If you are buying gold jewellery and wish to know what you will have to shell out per gram, then there is a facility to know the rate via just an SMS. GJF can provide hallmarked 22 and 23 karat gold jewellery rates if you send SMS ‘GOLD RATE’ to 575758. “These are suggestive rates and each jeweller will charge rates different then this. But the rates will not be lower. If they are lower, then you have to suspect that there is some problem,” Hayagriv says.

Best to buy from banks?
Banks claim to offer the purest gold and provide the same in tamper-proof packing with a certificate. But remember, reputed jewellers too offer the same packing. To ensure that it is pure, ask the jeweller if he will buy it back? If he says no, there is reason to be concerned as most jewellers selling true coins accept it back provided you take the invoice or bill while selling it. Banks, however, do not buy it back. As a result, you don’t get to benefit from any appreciation in the price of gold despite paying a hefty premium.

Also, bank prices are typically more than those offered by jewellers for the same quality of gold.

There could be fakes on the shelves
At some shops that DNA visited, there were fake coins in plastic packaging. The naked eye cannot distinguish between the fake and pure gold or silver coins. So, read the words on the certificate carefully. It should state ‘ASSAY’ and not ‘ASSAE’. Weight and purity is mentioned in “g” instead of “gm” or “/.” instead of “%”on these fakes. But these were small jewellers.

How else to avoid fake coins
You can buy gold in the form of exchange traded funds (ETFs) from the stock exchanges. “ETFs are essentially index funds listed on the exchange. You can buy and sell them just like you would buy and sell a share. In a gold ETF, the underlying asset is standard gold bullion (99.5% purity). In other words, a gold ETF is just like any other mutual fund scheme —- the only difference being the monies collected are, instead of being invested in equity shares, invested in gold. Generally, the price of one unit represents approximately one gram of gold,” says Sandeep Shanbhag, director, Wonderland Consultants, a tax and financial planning firm.

Presently, there are seven gold ETFs, offered by Benchmark, Kotak, Religare, Reliance, SBI, UTI and Quantum mutual funds.

Both BSE and NSE have announced that trading in Gold ETFs will be allowed on Sunday between 9 am and 3.30 pm.

How gold ETFs are different
When you buy gold ETFs, you get gold in units. This is not handed over to you, but will stay put in the demat account, which also holds your stocks. Thus you save the trouble of keeping the gold coins or bars or jewellery in a bank locker and pay additional annual rent for the bank locker. The locker facility is getting costlier by the day as realty costs of banks shoots up. A DNA Money survey found that medium-range lockers come at an annual rent of Rs 3,000-8,560. The banks also ask for security fixed deposits of a minimum Rs 10,000 and some even want Rs 20,000 deposit for three years. Paper gold can help you avoid blocking that money.

Those who are not sure whether to buy gold at these high levels and would like to average out the price of buying can start the process of buying a little every month. You can ask your stock broker to make an arrangement wherein a set amount of your money is used each month to buy gold ETF units. This can be done through direct debit at your stock broker, which helps you buy paper gold.

How to convince your wife
Now that’s the hardest bit. “But I can’t wear paper as a necklace,” she would protest. Try suggesting she wear a piece she hasn’t in a while. Also tell her how instances of snatching of gold chains are increasing even as the price of gold reaches for the sky. Tell her your gold is safer in the demat form.