Buying gold during the festive season is a longstanding custom in India, as the yellow metal is considered auspicious and is deeply ingrained in our national identity. Gold investments are among the most popular types, as they represent success and wealth.
Other precious metals, such as silver, are also considered an alternative investment option, particularly during uncertain economic times. As precious metals are rare and have a high economic value, especially metals like gold, they have historically been considered wise investment options. The best aspect is that these metals can be purchased with schemes similar to systematic investment plans that let buyers spread out their purchase over several months, making it affordable and helping people with budget management and long-term investment. Due to the easy EMI options available today, people from varied economic strata are saving in gold over a period of time.
Customers who buy gold and other precious metals pay through monthly, weekly and daily payment plans, and have the option of purchasing gold in instalments rather than paying for it all at once.
Whether you’re buying gold for the festive season or just thinking of it as a long-term investment, here are the precautions and pointers you should take before buying gold.
Choose reputable dealers: Make sure to buy from credible, organised sector players who comply with the required regulations including selling on BIS hallmarked jewellery. Avoid unorganised sector players who offer cash schemes, as most are unregulated and expose buyers to the risk of losses.
Understand the purchase structure: If you are planning to opt for an ‘easy EMI’ plan, make sure to understand and clarify exactly what the terms are. In such schemes as the previously banned cash collection plans, where you pay every month, there was no assurance about the amount to be paid at the end of the term or the price of gold at that time or the making charges, etc.. Instead, opt for more structured plans where you know the price is locked in at the beginning, and you are aware at the outset of exactly what jewellery or coin and of how much grammage you will get and the end of the given period. Unlike informal cash schemes, organised sector schemes come with the total cost upfront and transparency.
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Know what you’re buying: If you're saving for a wedding, and if you have chosen to save for a particular item, such as a 10-gram gold necklace, then make sure the agreement specifies design weight and total price. This clarity will protect you from last-minute changes or price hikes when you go to redeem your gold.
Credibility and trust: Research the credibility of the player you are going to engage. Check customer reviews and ratings on various social media sites. If there's consistent negative feedback, for instance, if several reviews indicate problems with delivery times or product quality, you should choose another player with a better reputation. Reliable players will give you transparent information about products and services.
Market price: Stay updated with the latest gold prices. As gold is volatile, prices can change significantly. Check gold prices from financial news websites or apps so that you have an idea of where to invest. If the trend of gold continues upwards, you should buy earlier instead of later, ensuring you get a better deal. By monitoring trends, you can make a more informed decision about when to invest.
Beware of hidden fees: Read all details and match them with your understanding before signing any document to avoid hidden charges at a later date.
For long-term savings in gold, there are modern alternatives as well.
Digital gold: You can invest in digital gold with as little as Re 1 and do not require any physical storage facility. Here are some benefits of digital gold.
Easy accessibility: You can buy gold through a few clicks on the relevant digital platform and accumulate it in secure vaults. Invest in small amounts and grow your gold portfolio.
Liquidity: Digital gold can be easily converted to cash or physical gold whenever needed, offering flexibility.
Sovereign gold bonds: These are government bonds that allow you to invest in gold without holding the physical asset.
Interest guarantee: You receive interest of 2.5 percent per annum until the end of the lock-in period.
No risk of theft or loss: With sovereign gold bonds, there’s no need for secure physical storage, thereby doing away with the risk of theft or loss due to their ownership.
Investing in gold and other precious metals is a tradition that has stood the test of time, especially during festivals. By choosing reputable, organised sector players, understanding your purchase details and exploring modern investment options like digital gold and sovereign gold bonds, you can secure your investment responsibly.
This way, not only would you be ensuring the preservation of your wealth but also maintaining that good investment as a positive addition to your financial future.
Keyur Shah, CEO, Precious Metals Business, Muthoot Pappachan Group
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