Wednesday, February 4, 2009

Gold as an Investment

If you prefer gold to be one of the investment, there are various options you can choose from like Gold ETF, gold coins, ornament etc. But what is that which gives you much benefit than the other ?
Buying gold from Post Office ?
In India, India Post in association with World Gold Council and Reliance Money is selling gold coins at selected Post Offices. It offers 24 carat gold in denominations of 0.5g, 1.5g, 5g and 8g. The gold coins will be packed in a sealed cover with the certification from Valcambi, Switzerland.
Drawback in buying gold from Post Office :
As of now, Post Office will not buy the gold coin bought from them. It seems that they will launch the buyback scheme later.
Inida Post charges a margin of 8-9 per cent.
Buying gold from Banks ?
Banks charge a margin of up to 12 per cent on the coins, which includes end consumer fee, certification charges, value-added tax and customs duty.
Drawback :
Banks are not allowed by Reserve Bank of India to buyback gold they sell.
Banks charge a margin of up to 12 per cent on the coins, which includes end consumer fee, certification charges, value-added tax and customs duty.
Buying gold from jeweller :
If you want gold as an ornament then you buy it from jeweller, the price will that prevailing on that day. You need to check for the purity of the gold. Jewellers even sell gold coins. You need to check if the jeweller will buy back the gold and if it is at the price prevailing on that day.
Drawback :
If you buy gold as ornament from Jeweller, you will be charged upto 30% as making charge and wastage. And when selling it back to the same jeweller, some charge about 4%. So, assume you bought 10g of gold ornament when its price is Rs 1200 per gram, then for 10g of gold you will be charged (1200*10) + (30% of 1200*10) = Rs 15600. If you want to sell it after few days, when the price is the same, you will get (1200*10) - (4% of 1200*10) = Rs 11520. This 4% may vary with jewellers. Please check.
Things to check while buying gold from jeweller :
Buy it from a reputed jeweller who will give you a certificate of purity and not charge a premium for that.
If you can sell the gold or recast it into jewellery at the same establishment at the prevailing gold prices.
If the jeweller has a buyback policy. If it has, find out the rate at which it buys back.
Gold ETFs :
You can also invest in Gold ETFs (Exchange traded funds). You can't see the gold, nor you physically hold it. There are various gold ETFs availab;e to choose from. The various gold ETFs available in India are, Benchmark Gold BeES, UTI ETF, Kotak GOLD ETF, Reliance Gold Exchange Traded Fund, Quantum Gold Fund. The investor should be careful on selecting the gold ETF as there is a trading commission or brokerage involved in trading at gold ETF. Some even charge a fund management fee.

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Disclaimer: All the information given in this blog is only my ideas and knowledge what I got from internet or other sources. For any interest rate, charges etc check the particular service as the charge might have changed. Regarding the intraday trading tips, this is applicable for that day only and also shouldn't be taken as advice. All the actions taken by you is responsible by you only. Thanks.

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