Keep this in mind before you invest in gold!

Investing in gold is considered the safest option, and there is no doubt that compared to the shine of gold returns, all other investments seem dull. In the past 10 years, gold has provided an average annual return of more than 16 percent. However, now the question arises: how should one invest in gold?

Although, speaking of gold often brings to mind physical gold jewellery and if you are buying jewelry for gold investment, you could potentially incur significant losses. Just like what happened with Amar.

He purchased 10 tolas of jewelry for investing in gold. At that time, the market price of gold was Rs. 72,000 per 10 grams. The jeweler calculated the cost based on 24 karats and added a making charge of 10 percent. This way, Amar ended up paying Rs. 79,200 per 10 grams for the jewelry. He paid Rs. 7.92 lakh for the 10 tolas of jewelry. It’s worth mentioning that not all jewelry is made of 24 karat gold. Jewelers often sell 22 karat jewelry and charge based on the price of 24 karat gold.

Later, when Amar suddenly needed money, he went to the jeweler with the jewelry. When the jeweler calculated the value, Amar was shocked. The jewelry he held was of 18 karats.

At the time of selling the jewelry, the price of gold was Rs. 72,000 per 10 grams. Thus, the price of 18 karat gold was Rs. 54,000 per 10 grams (72,000 / 24 * 18). Within just three months, Amar incurred a loss of more than Rs. 2.52 lakh.

Such incidents don’t happen only with Amar. A large number of people, especially in rural areas, buy gold jewelry for future needs. They end up paying a heavy price like Amar.

The Right Way to Invest in Gold

Personal finance expert Jitendra Solanki says that gold is a good option for investment. However, gold jewelry is not just a good means for investment. You cannot expect guranteed benefits from this investment. Therefore, one should avoid investing in gold jewelry. Purchase jewelry only for necessity, and make sure that any jewelry you buy should have hallmarks. If you want to invest in gold, Sovereign Gold Bonds (SGBs) are the best option. If you want to buy physical gold, buy coins or bars through banks. If you are buying these items from a jeweler, verify their authenticity.

Despite it being mandatory for gold jewelry to have hallmarks, some jewelers are still selling jewelry without them. Some people buy jewelry without bills to save taxes, but later, they have to pay the price for it. So whenever you buy jewelry, always ask for an authentic bill. This will benefit you in many ways. When you go to sell the jewelry later, the jeweler cannot evade the purity issue. If the jeweler is selling jewelry with a proper bill, he will avoid fraud. Whenever you buy gold, it should have a hallmark. Pay according to the gold’s karat.

If you have insured your home and belongings, you can claim them in case of theft or natural disaster. Insurance companies do not accept claims without a bill. This condition also applies to bank lockers. Moreover, jewelry purchased with a proper bill is usually not seized during income tax department raids. Therefore, do not get trapped in the temptation of saving on cheap jewelry and GST while buying jewelry.