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Are Gold Coins a Better Purchase than Gold Jewellery ?

Ever since gold was discovered man has been fascinated by it. Highly skilled goldsmiths have carved it into many shapes and sizes. We have seen gold carved into animal shapes, birds and national symbols. It has been molded into vessels and jars. It has been carved into daggers and bars. We see rare shapes such as bells, Gods and Goddesses and rare sculptures made of Gold. In India we see temples with golden doors, chariots decked in gold, golden thrones, golden crowns and even golden shoes."Pure Gold Does Not Fear The Smelter". It can be moulded into different shapes. Here if we read history we find a number of golden treasure laden ships sank during the 16th-18th century A.D. When these wrecks were salvaged treasure was recovered from them. This was in the form of golden coins and bars. This was a precursor to the modern shapes of gold sold by banks and jewelers notably the gold coins and gold bars. Gold Jewellery such as necklaces and bracelets continued to be made in the same shape as they were made centuries earlier. We have heard the saying" A Mask Of Gold Can Hide All Deformities " I would like to remind all of you that the team of Financial Planners at Moneymindz.com are always there for you to plan your Financial needs in a most effective and efficient manner. You can explore this unique Free Advisory Service just by giving a missed call on 022 6211 6588.

Where Does One Purchase Gold Coins In India
Gold Coins Are Available In Banks

Here gold coins are available in banks in different quantities such as 1g, 2g, 4g, 5g, 8g, 10g, 20g, 50g, 100g and so on. A number of banks such as Axis Bank, HDFC Bank , SBI, ICICI Bank and Bank of India are among the few of the banks which sell these gold coins. The prices range from INR 2700-INR 2900 for 1 g gold coin to around INR 29000 for a 10g gold coin .Some banks sell these gold coins even in 100g gold denominations at rates ranging from INR 285000- INR 325000.These are the rates as on 2nd May 2013 but they tend to fluctuate depending on market conditions . Currently gold prices have hit a 1 Year low.

India’s Post Offices

Gold coins of different denominations are available in Indian Post Offices at 1g, 10g and so on with 24 karat of 99.99% purity. These gold coins are procured from Switzerland. Post Offices mainly concentrate on gold of lesser denominations. These gold coins have International Standardization, Packaging, and Product Standardization. Sometimes special discounts are offered to customers during a certain season.

Reputed Jewellery Stores

One can purchase gold coins from a reputed jewellery store which have a very strong reputation. These announce gold prices daily inclusive of a certain premium. They have a very good distribution network such that one can purchase gold in one city and can then sell the gold coins in another city through the same retailer. Look for the hallmark or BIS sign on gold coins. This is a sign of quality and purity.

Reputed Jewellery Stores

One can purchase gold coins from a reputed jewellery store which have a very strong reputation. These announce gold prices daily inclusive of a certain premium. They have a very good distribution network such that one can purchase gold in one city and can then sell the gold coins in another city through the same retailer. Look for the hallmark or BIS sign on gold coins. This is a sign of quality and purity.

Gold Coins From Local Jewellers

One can purchase gold coins from a local jeweller. This is a common practice in India where gold coins are purchased from a local jeweller. One can purchase gold coins from them but there is no guarantee on the quality of these gold coins. Since prices offered here are lower people in India tend to flock to such places. However one might not realize great prices on selling these gold coins. Here their purpose might be self defeating….One can check their purity only when one goes to another jeweller.

Points To Be Kept In Mind In Order To Profit From These Gold Coins
Plan Where To Store These Gold Coins

Plan in advance where you want to store these gold coins. These are best stored in a bank vault. However certain charges are incurred when storing these gold coins in bank vaults.

Choose Wisely

There are many avenues or places where one can purchase these gold coins .Follow a method of bargain hunting .Avail a discount whenever available.

Track Gold Prices

Gold prices and the value of gold coins tend to fluctuate according to market prices. Keep a track of these. I have personally seen people track gold prices like their very life depends on it. Buy on Lows…Sell On Highs.....

Sell Your Gold Coins When There Is High Demand

Always do your research and your home work well…Do not try to time the market…Sell during the time of high profits when gold is at an all time high. Always sell to make a sizeable profit. Sell when the sentiment is generally bullish and always sell to make a profit.

Everything Has Its Advantages

  • The gold coins purchased from banks and post offices are 99% pure 24 karat gold. They have the purity and quality advantage. In India lakhs of people purchase their gold jewellery from their trusted jewellers. How Can You Be Sure That Your Trusted Jeweller Has Not Cheated You? Here in India most of the gold sold by these jewellers is of lower karat than stated. It might be 18 karat gold sold as 22-24 karat gold. Only when we want to resell the jewellery that we find its actual value. Here as far as purity goes gold coins should have the BIS Hallmark markings.
  • Here many people have slowed down investments in gold ETF and are focusing on the purchase of gold coins .Here gold coins because of their size and ease of use ,Packaging, Adherence to International Standards are gaining in popularity.
  • Resale value of these gold coins is high. They are bought in order to be sold and a profit realized. The same cannot be said for gold jewellery. This is mainly because of the sentimental value attached to it. Can you imagine selling that necklace which your mother gave you on your wedding, Your wedding ring given by your beloved, or your golden bracelets and family heirlooms. Isn’t It Even To Suggest This A Sacrilege? Here gold coins may have no aesthetic appeal and may be ugly looking. Still they can be sold at a profit.....

And It’s Disadvantages

  • The gold coin prices are known to fluctuate widely and a close eye needs to be kept on them in order to realize a profit.
  • Gold coins are not a short term trading investment. They may need to be held for at least 3 years in order to be sold for a profit
  • Gold coins need to be purchased in cash or cheque in case of purchases above INR 50000 and you cannot use that credit card for its purchase

All That You Need To Know About Gold Jewellery

You Don’t Just Buy Gold : You must have seen all those gold necklaces, rings and bracelets. They have to be artistically designed for that aesthetic look and feel. This involves labor charges or making charges which is nothing but the price of labor you pay for designing and making your jewellery. If you were to make all your purchases at a certain single jewellery store you can avail of certain fixed charges. This is highly beneficial in a rising gold market as it helps to offset the costs of hike in rising gold prices .Bangles and chains might have lesser making charges as they are mass produced by machines. Since making charges differ from jeweller to jeweller you have an opportunity to bargain.

Tips To Be Noted When Making Gold Jewellery Purchases

  • When you buy jewellery studded with precious stones the jewellery is weighed along with the precious stones. The jeweller might give you the breakup of the weight of the stones along with gold .However here you only have the jewellers word and you may end up paying more for the gold and getting lesser proportions of gold
  • Remember it is very difficult to check the purity of semi precious stones
  • Here we have intricate designs in order to increase the appeal of these gold ornaments. These command high making charges
  • Check for the purity of the gold ornaments. Most of the highly reputed jewellery stores have certain instruments to check for the purity of gold ornaments
  • You might have to use the buyback option if you want to exchange or trade your gold jewellery for a better or a more modern design. Your trusted jeweller might give you a better resale value .However if you sell this at another jewellery store they would check the purity of gold and deduct making charges
  • Gold Jewellery Schemes : Here you pay a fixed amount every month in a particular scheme and when the tenure ends you can opt for jewellery matching the amount you invested in. In the second kind of scheme your monthly investment gets invested in gold at the prevailing rates and when the tenure ends you can convert the gold into an ornament. When you opt for the first scheme you end up paying only for 11 installments the 12th installment is borne by the jeweller as a bonus. However you would not get this amount as cash but only in the form of gold jewellery. Here you need to pay up all your installments in time or you will lose on the bonus. Here you are forced to make your purchases irrespective of the gold prices and you might make your purchases when gold prices are high.

Disadvantages Of Purchasing Gold Jewellery

  • High making charges might be involved in the making of these gold ornaments and we need to check for purity
  • Emotional Reasons might prevent us from selling ornaments at a profit.
  • Gold ornaments might have to be sold at the same store they were purchased from and resale value is less and if sold at another store making charges are deducted
  • Problems in physical storage such as charges for storing in a bank vault.
  • You require to have your finances intact as banks do not lend for gold purchases
  • Currently we are in a bear market as far as gold is concerned and we don’t know how long it will last. Currently if we are forced to sell the jewellery it would not fetch great returns.

Tax Implications

Are you thinking of selling those gold ornaments Grandma Gifted You All Those Years Ago... You will have to pay capital gains tax. This might be short term or long term capital gains tax. If held for less than 36 months it is short term and for more than 36 months it is long term capital gains tax. Since you have kept these ornaments for many years you will have to pay long term capital gains tax. However you can take the benefit of indexation which is inflation adjusted returns .Here your original purchase price will be adjusted to the current price. In this way lesser gains will be calculated for tax deductions.

Financial Planning
Tax Planning
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