What You Must Know When You Exchange Old Ornaments With Cash or New Ornaments?

Monday, December 05, 2011

What You Must Know When You Exchange Old Ornaments With Cash or New Ornaments?

Greetings from Hitesh! Thank you for your responses to my last email… What You Must Know Before You Invest In A Gold Next Time?. I have got feed back and words of appreciation from more then 500 friends. I take this opportunity to thank you all for reading my emails and appreciating the same. I am feeling blessed for making difference in so many people’s life. As written in the last article, today I am dealing with exchange of old ornaments.

Gold Ornaments Basics:-

In India, as per BIS standards you can buy ornaments of following purities.

1. 23 carat - 95.8%

2. 22 carat - 91.6%

3. 21 carat – 87.5%

4. 18 carat – 75.0%

5. 14 carat – 58.5%

6. 9 carat – 37.5%

Generally 22 carat is the most accepted all over India. You get lot of variety in the same. In this article, I have focused on 22 carat gold ornaments only. However, you can apply the basic rules to any of the variety.

Hallmarking Basics:-

Please check following 5 things when your jeweller tells you that a particular ornament is BIS certified.

1. Bis Triangle.

2. This is the first sign followed by 916

3. Assaying & Hallmarking Centre’s Mark

4. Jewellers Identification Mark

5. Year Of Manufacturing in code letter decided by BIS. e.g. (code letter `A' was approved by BIS for year 2000, `B' being used for the year 2001 and `C' for 2002 and 'J' for 2008).

The marking is done either using punches or laser marking machine.

If your ornaments do not have these 5 things……..it is not considered standard gold.

Please keep the above basics in your mind while purchasing new gold ornaments. Now, let us see what happen when you convert old to Cash / New.

You can face either of the following situations……

1. Old To Cash From The Jeweller You Have Bought.

2. Old To Cash From Other Jeweller.

3. Old To New From The Jeweller You Have Bought.

4. Old To New From Other Jeweller.

Old To Cash From The Jeweller You Have Bought:-

Ideal case :- He should buy your gold at his buy rates….Eg. If his selling rates for .916 is 28500…his buy rates would be around 27500. You should get this rate.

In practice, he will deduct 10% to 15% of his selling rates….10% of 28500/- when you go for a cash!! This is assuming you are giving him Hallmarked gold….if you gold is not hallmarked….you will end up getting 26000/-. The most funny part comes when he deducts the making charges from this amount.

Eg. If you had bought gold in 2001 and paid the making charges….now when you sell the same gold to this guy….he will again deduct making charges!! For What?

Old To Cash From Other Jeweller:-

Ideal Case:- He will test the purity of your gold ( have you seen he test on some black stone?) and he will offer you his rates.

In practice, since testing and judgement of the gold is done on the black stone….it is very subjective and you have to accept his judgment. You will be offered 15% to 25% lesser than the market price depending on his judgment of purity.

Old To New From The Jeweller You Have Bought:-

Ideal case:- Jewellers should offers the equal amount of gold against your old gold when you convert into new ornaments….plus making charges for the new ornaments.

In practice……he will also deduct melting charges for your old gold !!

Old To New From Other Jeweller :-

Ideal Case:- He will test the purity of your gold and he should give you the equal amount of gold plus making charges. I am assuming that you have hallmarked gold.

In practice, he will give you his rates for buying your old ornaments…..he will give you credit for the same…..and against that credit you buy new gold and you have to pay the difference.

E.g. If you have given 10gms of old ornaments and his judgment shows that your gold is of 18 carat and not 22 carat, he will offer you his rates of 18 carats minus melting charges and this amount would be credited to your account. Now you buy 22 carat gold and pay the difference of 4 carat + making charges.

What Should You Do?

1. Get the purity of your gold tested at any Computerized Laboratory. Normally, you will find them in Zaveri Bazaar of your City. They charges just Rs.30 to Rs.50 for their certificate and they do it in front of you.

2. If your purity is below 22 carat…..melt your gold. In Zaveri Bazzar of Mumbai there are lot many melters….they will melt all your ornaments in front of you and give you the Bar. Melters will charge just Rs.70 to Rs. 100 per 10gms.

3. Go to the computerized lab again…and get the total bar tested....Now you will get the total purity of your gold. (You will also come to know what your friendly jeweller has sold to you).

4. You can sell the bar at market price….no deduction/no making charges deduction. Eg. If 24 carat price is 29000 and your bar is of 20 carat….you get Rs.24166 ( 29000/24*20).

5. Take this money and go to any jeweller of your choice and buy new hallmarked ornaments only.

6. When you buy new ornaments…..please check all of the above 5 signs…Hallmarked Triangle, 916 etc. In practice you will find that only 916 is marked in many ornaments. If that is the case.…then do not buy…it is not Standard gold.

7. If you find any of the above procedures tiring, waste of time etc……then please do not Curse the persons who Cheats you…..you have only given them a chance !!

8. Always Remember There Is No Free Lunch !!

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.