Watch who you buy your gold from

The favourite metal of most Indians touched Rs 16,010 per 10 gram a day before the auspicious day of Dhanteras, when people go gold-shopping.

On Thursday, it closed at Rs 15,800 for 10 gram, down Rs 210.

Jewellers say they are seeing demand for coins rather then for jewellery, as people make investment-related purchases.

Mehul Choksi, chairman of Gitanjali Group, said, “There is heavy demand for investment as people believe prices will go up. There is a school of thought that believes gold will rise to Rs 20,000 per 10 gram.”

So where should you buy gold from, if you want to buy coins?

Retailers will state they offer the purest gold, but since the naked eye cannot differentiate the good from the bad, it is best to go with a trusted source. It is recommended to buy from jewellers rather than banks, and the latter charge a higher premium.

On a day when the market price of gold was Rs 15,930 for 10 gram — Rs 79,650 for 50 gram — a leading private sector bank sold a 50 gram coin of 99.99% purity at Rs 94,519. The bank claims it provides an ASSAY certificate and a tamper-proof pack.
Choksi said, “We too are providing the hallmarking certificate.”

Among banks too, there is a wide variation. A public sector bank pegged the price of the same 50 gram coin in the same packing and with the same certificate at Rs 84,149 — a difference of more than Rs 10,000.

Why this difference? A bank official told DNA Money on condition of anonymity, “The prices depend on the time we source gold. So, if the prices were low when I procured it, I will be willing to pass on the benefit to the customer. Also, the expense structure varies with banks.”

Banks are promoting sales by offering discounts of 1-5% on their prices. However, a 4% discount after inflating the price by 19% will still cost you more than what jewellers may charge.

DNA got prices varying from Rs 80,120-82,465 for the 99.99% pure gold coin with an ASSAY certificate at various jewellers in both South Mumbai and the suburbs.

If you want to avoid these purity and price-difference concerns, you can opt for units in gold exchange-traded funds (ETFs). Gold ETFs are mutual funds, whose units can be purchased via the stock exchange. The price of a unit is based on the international market price of gold.

There are six gold ETFs in the market, offered by Benchmark, UTI, Kotak, Reliance, Quantum and SBI  mutual funds. You can buy as low as 0.5 gram in a gold ETF, while others offer purchase of 1 gram. Such gold holding are held in your demat account, and you will not receive physical delivery of the metal.

Even at these levels analysts say the metal would be a good buy. Rakesh Bansal, Delhi-based, chief executive officer of newagewealth.in, said that even by a conservative estimate, gold will cross $1,100 per ounce (right now, its at $1,054 per ounce).

“Big fund houses and research heads have been talking about gold at $1,200-1,250. Gold will never come to $950 now,” he said, adding: “I am very sure it will cross even Rs 17,000 in the next two-three months. It will not stop as it has entered uncharted territory.”
He said, “It is better to buy now. If the rupee weakens, then the increase in dollar will push prices further up in the Indian currency terms.”