March 16, 2013
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 India
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.30000, 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.30000
for the day…..he will buy the same from you at 29000. 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.29000 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.30000 for 24 carat, ideally it should be Rs.27500 for 22 carat (30000/24*22).
But the jeweller would sell you 22 carat gold at Rs.28500 to Rs.29500 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.100 to Rs.3000 per gms. As a buyer, if you bargain to reduce the
making charges, the jeweller would oblige you by reducing Rs.5 to Rs.150 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…..
1. Buy coins or bars of
.995 variety only.
2. Try to convince
jewellers to give you gold ornaments against your gold coin.
3. 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.
Comments
Post a Comment