What You Must Know Before You Invest In A Gold Next Time?
November 30, 2011
What You Must Know Before You Invest In A Gold Next Time?
I assume you must have bought gold at least once in your life. Next time you go to buy, please keep following points in your mind. I am sure it will help you to buy right kind of gold.
Gold Basics:-
Pure Gold has 24 Carats. Local jewellers use the terminology of 100 touch (100 percent for you and me). In market you get gold of four kinds….
1. .995 or 99.5% Purity.
2. .999 or 99.9% Purity
3. .9999 or 99.99% Purity.
4. .99999 or 99.999% Purity. (Only 5kg brick of Johnson)
In
The gold used for making ornaments is of 91.6% or 22 carats purity.
If you are clear with this basic, let me deal with what kind of gold coins or bars you should buy.
Gold Coins/Bars :-
I have observed that most of the investors buy the gold of .999 or .9999. When you buy this gold, you end up paying extra Rs.1000 as a premium for above mentioned purities compared to .995 variety. On a price of Rs.29000, this is works out to 3% extra.
What Happens When You Go To Sell Them?
All jewellers have their buy and sell rates for the day…..if his selling price for 10 gms is Rs.29000 for the day…..he will buy the same from you at 28000. In other words, irrespective of purity of gold, when you sell, you end up getting less. So, we have two scenarios....
1. If you sell .995 variety of gold, you get Rs.1000 less per 10 gms.
2. However, if you sell .999 or .9999 variety of gold you get Rs.2000 less (Including Rs.1000 premium paid for purity at the time of purchase)
What Happens When You Convert Your Gold Bars into Ornaments?
Many of the normal investors buy small lot of gold coins to be converted into ornaments for auspicious occasions like Marriage.
In the ideal case….when you give your pure gold coin to buy 22 carat (.916 purity) gold ornaments….you should get the difference of 8%. (.995 - .916). The same can be adjusted against your making charges. But in reality...
The jeweller would give you the credit of your gold bars at his buying price of the day….in above example it is Rs.28000 for 10 gms, irrespective of your purity. (So he made Rs.1000 in the first place without selling you any thing!!).
The story does not end here……real loss comes when they calculate the price of 22 carat gold?
If the current price is Rs.29000 for 24 carat, ideally it should be Rs.26583 for 22 carat (29000/24*22). But the jeweller would sell you 22 carat gold at Rs.27500 to Rs.28500 depending on his brand name. It means you are paying Rs.1000 to Rs.2000 extra when you buy 22 carat gold ornaments plus you have to pay making charges also.
The making charges ranges from Rs.40 to Rs.1000 per gms. As a buyer, if you bargain to reduce the making charges, the jeweller would oblige you by reducing Rs.5 to Rs.50 per gms.
To Sum up, when you buy coins……
1. You pay higher price of the day.
2. You get Rs.1000 / Rs.2000 less per 10gms at the time of selling them or converting them to ornaments.
3. You pay extra Rs.1000 to Rs.2000 per gms when you buy 22 carat gold ornaments.
4. So, when you sell 10gms of gold coins to buy 10 gms of gold ornaments you lose close to Rs.4000 to Rs.5000.
I suggest you follow below given steps when you invest in Gold coins…..
Buy coins or bars of .995 variety only.
Try to convince jewellers to give you gold ornaments against your gold coin.
Try to bargain for the 22 carat price and not for the making charges.
This article was focusing on the Gold coins and gold coins to ornaments. If you like this article let me know. I am planning to write next article on exchange of old ornaments to for new ornaments!!
Hope you enjoyed reading this email…This article is being sent as a part of investor educations initiatives taken by Destiny Management Services. We believe Education is the best place to invest. Do you agree?
Live With Passion…Invest With Passion.
Hitesh Parikh.
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