Investing in gold doesn’t guarantee glittering returns
Richa Kapoor, a 32-year-old vice-president with a consumer goods firm, was on the look out to diversify her investment portfolio. Since she has invested in mutual funds, stocks and post office schemes, she decided to invest in gold, traditionally considered to be a secure and safe investment. After doing research on the pros and cons of buying gold coins and bars, Kapoor had a mild shock. Though there are a couple of options to buy gold from either a bank or a jeweller, when it comes to selling the yellow metal, the fine print is different, as Kapoor discovered. It is a little known fact that when it comes to selling gold coins and bars, there is a 4% deduction. In case, it is not 24 carat, the deduction is 8%.
With many banks venturing into the gold coins, customers can now buy the round shaped coins and rectangular shaped bars from them. But the banks do not buy back the gold, thanks to the RBI guidelines. Though a jeweller accepts the gold, it can be only exchanged for jewellery after taking a hit of 4% deduction. No cash is offered against the gold. However, if the gold is purchased and sold back to the same retailer,then there are no deductions if one exchanges the gold bar for jewellery. But there is 5% service charge levied when sold for cash. Experts say that it is cheaper to buy gold bars and coins from a jewellery retailer as compared to a bank. This is taking into account the market prices of the gold and the comparison between the banks’ transaction charges and the jewellers’ conversion costs, the deal works out to be sweeter with the jeweller.
Source: Times of India Mumbai. 25th Feb 2008, Page 25
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