I have written about investing in gold through gold ETFs, and gold monthly income plans in the past, but there is a more direct way to invest in gold, and that is by buying gold coins. I use the word direct because you buy physical gold, and don’t have to pay fees to the middle-man, thereby eliminating at least one layer in between.
The flip – side is that you will have to store physical gold with you, but most of you would have bank lockers to store jewelery anyway.
Here are a few things you should know about buying gold coins in India:
1. Reputed banks sell gold coins: The most important thing to me is that reputed banks like SBI also sell gold coins, and that reduces the chances of fraud, and someone selling you something which is of less purity than they claim. A lot of banks have entered this space, and they sell gold coins through their branches. Not every branch will sell you gold coins, so you need to go to the bank’s website and find out the closest branch that will do so.
2. Different sizes: Gold coins are available in different sizes, so you can buy the ones that suits your needs the most. The usual sizes are coins of 2, 4, 5, 8, 10, 20 and 50 grams. The coins are 24 carats, and the banks guarantee their purity too.
3. PAN needed if you are buying gold coins worth more than Rs.50,000: If you plan to buy gold coins worth more than Rs.50,000 then the bank will ask you for your PAN details. I don’t think a jeweler will ask for similar documentation, and that might be one reason to go to a jeweler to buy a gold coin.
4. Banks won’t buy – back your gold coin: I have not seen any banks that you can sell your gold coins to. They are happy to sell you their gold coins, but you can’t go to them and sell it back to them. You will have to sell the gold coins to the jeweler, and this is probably another reason for buying gold coins from jewelers in the first place.
5. You might pay a premium for buying gold from a bank: Now, I started off extolling the virtues of buying gold coins from reputed banks, and I will end this post by mentioning that if you compare prices between your local jeweler and some banks – you might find a difference. There will be a difference even when they guarantee the same purity. A lot of people think that this premium is worth it because the price is higher when you go to sell the gold, but that is not always true. You don’t get this premium while selling off your gold coin. In effect, buying gold coins from your jeweler might turn out to be cheaper than buying it from a bank. It is up to you to decide whether the difference in price is worth it to you or not.
These were just some points that you should keep in mind while buying gold coins – I am going to write more about this topic in the future because a lot of people are interested in this, and would love to hear if any of you have had any experience with buying gold coins.
banks are always expensive only due to some costing/accounting reason. also they do not buy back. hence jewellers are best. but you need to buy with hall marking for the purity. hall marking is the gurentee for the purity. it does not matter whether you buy 22k or 24k but you should verify the price calculation according to the purity. generally 2-3% you can pay as making charges apart from gold rate and tax. any further clarification you can mail me up.
Also another point to be noted, HDFC bank gives discounts on the gold coin prices to its savings accounts holders. On akshay tritiya it was 5% (i.e. 95% of the value of gold that day at bank rates)… and on other days (e.g. last week when i went o buy some) i get 3%. This helps in reducing the cost of certification and i still get 999 grade pure gold.
Hi Manshu
Just wanted to share few facts from a recent purchase of gold (gold rate at banks was shockingly lowest on akshaya tritiya). I buy 10 gms of gold from bank and 10 gm from a jewellery chain at every 6 months interval. High level pointers below
– Banks charge a higher rate due to the assay certification. Also lot of people tend to confuse between pricing of 24 carat (at banks and higher) and 22 carat (most jewellers sell and lower). Banks will charge premium for certifying the purity which most jewellers will not give in writing. They only give a stamped paper of their own not a certificate from an independent assaying authority
– Banks are not allowed by RBI directives to trade in gold. Hence they cant buy the gold coin back. Privately speaking, lots of banks are trying to get the RBI to change this policy so in future (about 7-10 yrs from now) they will also buy back the gold. This should be good for long term investment purposes
– Jewellers sell 22 carat gold but they deduct (at tanishq, joy alukkas and 3-4 other chains) about 5% of the gold value when they buy back. Also they buyback only in exchange for jewellery purchases, not cashback
– Khazana jewellers is the only one who agreed to give full cashback on coins purchased from them, but all jewellers will deduct 5% on gold of any other source (on jewellery purchases), plus of course making charges of 20% – 40%
– Just like any other investment, gold buying should be irrespective of market timing and pricing. Sort of SIP i.e. a few grams every quarter or 6 monthly interval
– E-gold concept is in infancy and regulations are yet to be clear. Hence avoid in my humble opinion
– The gold harvest scheme of most jewellers (you pay a fixed amount for 11 months and the jeweller matches that in the 12th month) gives almost 11% returns. Pretty good SIP and helps time purchases like dhanteras, birthday, anniversary etc
Thanks for leaving such a detailed comment and sharing your experience Anshuman.
Dear Ansuman/ Manshu
Hello, this is in response to your sentence “lots of banks are trying to get the RBI to change this policy so in future (about 7-10 yrs from now) they will also buy back the gold. This should be good for long term investment purposes”.
In response to above statement , I would like to clarify that Banks will never buy back gold coins sold by them , the very reason for this is , if banks advocate this policy then the intrinsic value of Rupee will depreciate and our currency will fall and eventually economy. Also, to support my words you can search on google ” Central Banks Suppress gold prices “, for any Central Bank rising gold prices are not good for their currency, and if banks start buying back gold then people will eventually have more faith in Gold than in the Currency of the country.
Dear Niraj – Thank you for all your wonderful comments here, and I have a post today that builds on something you wrote in a comment, however in this case I’d beg to differ. I think you’re getting mixed up with gold standard, or a currency that’s based on gold versus just the simple act of banks buying back gold that they sell.
While I agree that there is so much nominal currency out there that no country can go back to the gold standard, there is no reason for an economic collapse if banks were to buy back the gold they sold.
Thank you for your valuable suggestion!!!
I have a question reg.purchase of gold coins for investment purpose. Whether to go in for
purchse of a 22 ct gold coin or 24 ct gold coin from a reputed jeweller. Which will be advisable, please advise me.
Dear Ms.Nathan,
No matter whether you buy a 24kt / 22kt gold coin/biscuit, but make sure what is the difference between sell price and purchase price of the jeweller for 10 grams. Though personally I suggest you to go with 24kt since it would be acceptble across cities in India
Thanks Niraj. You have made it Cristal clear..Much appreciated.
Thanks for the information. I recently went to bank and a jeweller and the differnce was around 2k. I thought of sharing another interesting article on investing on gold http://www.want2rich.com/2011/05/personal-finance/an-asset-for-all-times-gold/- hope this would be helpful to everyone.
I don’t think there is a particular month which is good to buy gold. There is no guarantee that the gold that’s bought in say Novemeber will be cheaper (or purer) than it is in December, so there really is no such thing is a best month to buy gold.
I want to understand why SIP in GOLD ETF is not available ?
SIPs are generally done in mutual funds, and an ETF is not a mutual fund so that’s the reason.
However, these days ICICI Direct allows you to do a SIP in gold ETF and then there are some alternatives to this as you can read in this post:
http://www.onemint.com/2010/03/15/how-to-set-up-sip-in-etf/
Dear Ms.Swathi
I have answered to your concerns inline accordingly
1.How much difference between marketing and banking prices when i am purchaging gold in any bank?
When you buy gold coins/biscuits from banks, the purity will be either 99.90 or 99.99 with tamper proof seal pack and assayed by swiss assayer “Essayeur Fondeuer”, for this they charge you a premium or making charges of Rs.100 – Rs.300 / gram which is very expensive in 24kt pure gold, where as if you buy in local jewellery market, you have to buy 99.50 / 99.90 pure gold bars where you pay Rs.0 – Rs.20 / gram as making charges!!, so it is advisable to purchase gold from your local jeweller with bill and purity mentioned on the gold biscuit and also on bill.
2.Is there any difference in price when campared with one baank to other bank?
Yes, every bank has different price for 99.99 seal packed tamper proof gold coins/ biscuits irrespective of their vendor/supplier being the same – in this case VALCAMBI SUISSE and PAMP.
3.Banks won’t buy – back my gold coin then where is it i am selling?
if iam going to sell it to jewllery shop then it is profit or loss to me?
The first loss you have incurred on the day when you have purchased gold from a bank at such high premiums, due to RBI norms banks don’t buy back gold, so the only option left with you is to sell in local jewellery market, where your gold will be purchased at current purchase price of 24kt gold( you won’t get any premium when you sell 99.99 tamper proof gold bars, though you have to pay to buy one)
4.what is the present price of 1gram gold?
in future(2-3mn) what is increment i am expecting?
The current price of gold is Rs.21150/10 grams, it may be variable depending upon the local taxes and duties as applicable in your city. It would be highly unpredictable to judge whether gold will have a bearish / bullish pattern ….
Thanks Niraj.
1.Howmuch difference between marketing and banking prices when i am purchaging gold in any bank?
2.Is there any difference in price when campared with one baank to other bank?
3.Banks won’t buy – back my gold coin then where is it i am selling?
if iam going to sell it to jewllery shop then it is profit or loss to me?
4.what is the present price of 1gram gold?
in future(2-3mn) what is increment i am expecting?
I have regular requirements of gold, ie 600 grams to 2 kgs everyday as an retailer, & m already purchasing it from RSPL bullion on market price, but I heard of discounted gold can anyone pls out there let me know is real or myth.
Thank you.
Dear Mr Karthik, The Tirumalai Tirupati Devasthanam, Andhra Pradesh temple sells by auction the gold it gets as donations. The quality& purity may differ from one piece of ornament to another. The dates, terms & conditions may be got from it. Shops also sell gold below the market price if they are not members of the gold jewellers association to attract buyers. Whether their purity is high or low or as they claim is not known. One shop in Chennai stated on its notice board that other shops sell at a discount only as the purity is low. It later sold at a discount and removed its notice. It made people suspect its purity.
Dear Karthik,
You can get coins from banks at a discount as they offer discount on bulk purchase i.e. 500 gms or more. U can get the same from SBI also a discount which depends upto your quantity required. If u need any contact I can supply the same to you.
I have recently purchased a gold coin fromSBI,for which they have given me a purity certificate (supposedly) which I think is useless for the following reason:
The certified pack containing the coin does not carry a number, serial or reference,hence one cannot claim that the certificate indeed refers to the “pack”
in case of a dispute.
Does all SBI gold coin packs come without a serial or reference no. ? ( On the pack itself there is a place for number,however it is blank in the gold coin pack that I havebeen given). Or have I got something “SPECIAL” ? Can anyone enlighten me
please, before I take up the issue with SBI. I will be thankful.
SBI presently sell 2gms, 4gms, 5gms, 8gms, 10gms, 20gms, 50 gms and 100gms coins to retail investors. While the coins of denominations of 20gms, 50gms and 100 gms are serially numbered, the others are not. You have not specified which denominations of coin you have purchased from SBI.
Further as regards the purity of the coin is concerned you should not have any doubt about it as the same has been purchased from the reputed organisation viz. SBI.
Even if you have any doubt about its purity you can get it verified/tested from the Govt. approved shop/establishment . Once you are satisfied about its purity, the Bank’s purity certificate is no longer required by you. If not it can be claimed from the Bank even without packing.
Sorry, I wrote soon. For others who might be interested the contact centers are given here:
http://www.bis.org.in/cert/hallmarkass.htm
I recently (several years ago) purchased gold 100 grams at 22 karat purity as a coin from a reputed local jewelery shop in Chennai. However, when I decided to change it into bangles from another shop I was having trouble because apparently the purity changed while I kept it in my locker. However, the original jeweler is able to take it back for the same purity. Finally I returned back without purchasing. Is there a standard way to test the gold purity immaterial of how much these local jewelers might pay for it?
I would really like to test all my jewelery (both silver and gold) using a third party accurately. And I do not want this scratch type testing. I looked up online and there was this spectrometer based testing. Can someone please tell me if I can get my jewels tested for purity professionally using this machine? I am even willing to pay for such a service. I wanted to buy this device and would have bought it had it been only a few thousand rupees, but this one is really expensive.
I really have no clue about this, but I hope another reader who has experience leaves a response to you.
My other question is, there are 2 rates for silver given in the newspapers.
1) Bar silver
2) Ornamental solver
And the bar silver is cheaper than the ornamental silver for several 1000 Rs for 1 kilo. Which one is purer and when I sell it back, which one goes for higher rate.
This is confusing because, most jewelers take some % of the value while buying back from customers. Now when we sell bar silver will they take a % from the bar silver rate and when we sell ornamental silver will they take a % from the ornamental silver rate? How can the bar silver be of less value than ornamental silver if it is infact more pure?
There is something fishy in this market. And all the more these jewelers do not buy each others metals and this further confirms my suspicions. Anyone who can shed light in this matter would be appreciated.
Dear Mr.Nole,
Firstly I would like to clarify some myths which exists in the market for gold jewellery
1. GOLD no matter whatever purity you buy will never get impure / corroded/ degraded / decrease or increase in weight even 0.o5o grams , if you keep it in a safe place even for 100 years, it is this property of gold that has made it valuable.
So the jeweler who advised you that your purity of gold changed while you kept in the locker for a while is incorrect.
The purity of gold when you buy it from a jeweller will remain same and will never change with time, if someone says that the gold is of less purity than you had bought it, then it implies that the jeweller from where you bought the gold has sold you gold less than the assured purity.
Now , concerning your point of testing your jewellery through a spectrometer, as you rightly mentioned spectrometer / karotometer ( commonly used ) are very costly and the pricing of karotometer ranges between 6 lakhs to 12 lakhs!.
So how a common should get his jewellery tested ??
The solution to this is , usually across India Government of India has recognised BIS hallmarking centres, these centres are usually located in main wholesale / retail jewellery market areas of the particualar city, like in chennai it should be located nearby T Nagar.
You can walk into these hallmarking centres with your jewellery and ask them to test the jewellery for the purity which jeweller has assured you.
During the testing the hallmarking centres are required to cut upto 0.100 – 0.200 grams behind every product and subject it to different gold testing methods like
1. Fire assay test.
2. Spectrometer test
3. Nitric Acid and Touchstone scratch test
They then take an average of all these different methods of testing and give you a certificate of purity for the jewellery product which you have given, and also they give you that 0.100 – 0.300 grams of gold back which they had taken from your ornament , in the form of pure gold.
These reports are completely unbiased and authentic from a government recognised hallmarking centre. The charges are Rs.20 / per product or piece. The process requires between 3 – 5 hours.
Note: Kindly confirm the process with BIS hallmarking centre of your city before handing over your products for testing.
Dear Niraj,
Thank you for the clarification on the storage of gold. I feel that this standardized testing is the best solution.
Because, for the same gold coin, the jeweler from whom I bought is quoting a higher purity while another jeweler is quoting lesser purity. I was sent back and forth a couple of times and this completely frustrated me out. These are the big reputed jewelry shops in the T Nagar area.
I am very much interested in this government run BIS hallamarking center.
Could you please give me some contacts in T Nagar area?
Also do they check for both gold and silver?
Dear Nole,
Kindly follow the below link for BIS hallmarking centre in Chennai T Nagar
http://www.bis.org.in/cert/hallmarkass.htm
Wow this is pretty detailed and amazing info – thank you so much!
Dear Mr Nole, May I please know how purity can change while in a locker ? Gold is not known to lose purity merely by time passing. It can look old if it was used. The Karat meter machine is in some shops (Khazana, Tanishq, etc.) in Chennai but may show the purity of only the outer layer (skin touch) and not the inner parts of the piece of gold. A more sure way to test is by chemical analysis i.e., by cutting a sample of a piece of gold and treating it with certain chemicals in a laboratory. That will cost you & make you lose that gold sample piece itself. You will only know the purity of that sample part of the piece. Only because it is taken from the whole piece you may think that the result of the test is fit for the whole piece. It is a costly test. Also by melting the gold it is possible to know the purity. It will cost much and make the piece lose its shape and needs to be again made. It is also costly.
A jeweller in Chennai bought gold from another so called “reputed” jeweller shop who has a shop in U.P. , Dubai & Singapore and paid a tax and got a receipt. He tested the gold and found that its skin touch was 22% but inside purity was only 18 %.
I want bye sbi gold.what is it’s proses ? Please give me some info.
Please visit a branch as mentioned in an earlier comment, and they will be able to explain the process in great detail.
I will require 200 gm gold after 10 years, at my daughter’s marriage. What should I do ? Should I puchase now at this point or wait for the correction in gold price?
Please guide.
– RAKESH DAVE, Ahmedabad.
Well, I don’t think anyone can predict how gold prices will move, and my opinion has always been to try and regularly invest instead of trying to time the market since you never know what will happen.
Thanks a lot, Manshubhai. Further I want to understand why SIP in GOLD ETF is not available ?
– Rakesh , Ahmedabad
I think you posted that question again and I answered it there. Right?
Please make correction GAQ to FAQ