Gold has been traditionally one of the safest modes of investment in India. It is also linked to auspicious occasions in our country and therefore, shelling out money to buy gold on occasions like Dhanteras, Diwali, Akshaya Tritiya, and others is not just a tradition but also considered a wise investment. Besides financial value, the precious metal has social value as well.
As Diwali approaches, many of you must be planning to buy a gold coin or jewellery. In today's market, from buying physical gold to bonds and investment through SIPs, there are many ways to invest in the yellow metal. But on occasions like Dhanteras and Diwali, people in India still prefer buying physical gold because bringing gold into your home has special significance. It is believed that buying gold on occasions like Dhanteras and Diwali brings prosperity and happiness into the family.
For those who are looking to buy gold coins or jewellery, here are a few things you need to know:
Gold Purity: Karat and Fitness
Many think that buying jewellery is difficult because you find it tough to select the design than a gold coin or bar. But it is also not an easy task to buy a gold coin. Before you invest money in a gold coin, you should check its purity. There are two ways to measure the purity of gold coins in the market -- Karat and fitness.
24 Karat is considered to be the purest form of gold while 22 Karat gold comes with other metals such as silver or zinc. This is why 22 Karat gold has more durability than 24 Karat. For jewellery, 22 Karat gold is used because 24 Karat is too soft.
The second parameter is fitness. Fineness is measured in purity in parts per thousand. According to the World Gold Council, 24 Karat gold is refined to a fineness level of 999.9 parts of thousand.
Vastupal Ranka, Director, House of Ranka Jewellers, said that both gold coins and gold jewellery are equally significant for investment purposes. But jewellery has a usage value as people can wear it as an ornament whereas gold coins remain idle. Vastupal said that if the purpose is only investment, one should invest money in gold coins.
"Generally, a 24 Karat gold coin should be bought by customers," he said, adding that customers always have an option to exchange gold coins into ornaments. He said that gold coins come with a less making charge than ornaments. Ornaments require fine cutting and therefore the making charge may vary between 10 to 25 per cent.
Gold Coin Resell
Saurabh A Khandelwal, owner of Dhanvi Diamonds, said that customers get 100 per cent return on gold coins or jewellery except for the labor charges which will not be returned in any of the cases.
"The making charges for the jewellery are higher in comparison to coins but the extra price you are paying obviously helps in defining the fashion statement which coin doesn’t," he said. "When you resell your gold coin or jewellery then the labor charges are not refunded and you get the amount of the gold of the prevailing prices on the day of reselling. If the gold prices are increased on that particular day you will get an increment, if the prices are decreased then you will get a decreased price."
Another important aspect is hallmarking. The government has set up the Bureau of Indian Standards to ensure customers are not cheated. The government has made it mandatory that from January 2021 every jeweler should get a hallmark license.
The hallmark certifies the level of purity of the yellow metal.
Gold Coins Packaging
Many jewelers recommend people not to open the tamper-proof packaging. Although there is no law in place for packaging, many sell the valuable assets in tamper-proof packaging.
"There are no specific packaging parameters for the gold coins, but yes they’re available in a credit card style laminated packaging across the industry. There is no such mandate as per packing rules or provisions," Khandelwal said.
Apart from the local jewelers or a brand, you can also buy gold coins from banks and non-banking financial companies. The country's largest lender, State Bank of India, also offers gold coins. The SBI sells gold coins through its designated branches. But when you buy a coin from a bank, you must keep in mind that banks will not buy back coins. The Reserve Bank of India bars banks from buying back gold coins.