Dhanteras 2023: This Diwali, learn a new way to buy gold and start saving for your next purchase of yellow metal

livemint.com:

1) Counterparty Risk - One of the most important risks customers forget about here is credit risk. What if the jeweller goes bankrupt? There is no guarantee or gold collateral by jeweller when customers subscribe to such schemes. In India, there are many jewellers (even the big chains) who have gone bankrupt and accordingly lot of customers who subscribed to such schemes were left stranded.

2) Gold price risk - What if gold price goes up at the end of tenure? In gold saving schemes, customers don’t get benefit of gold price rise inspite of paying periodic instalment. In fact, many times customer ends up buying gold at higher price at the end of tenure of the scheme. 3) Ancillary cost - Gold price quoted by jeweller is higher than actual gold price & also varies from jeweller to jeweller.

This is due to various ancillary cost components which are added to the cost of actual gold price. This includes the jeweller’s mark up on gold price, GST on gold @ 3% and making charges depending on the type of gold purchased. The price quoted by top jewellers for 24 carat gold coins was ~11% higher than prevailing gold price based on data of 07th November, 2023.

Since customers must buy gold from the same jeweller under the scheme, he/she will have no option but to accept the price quoted by jeweller. * this is simply an indicative range sourced from multiple website and public disclosures. 4) Selling price mark up - Buying price of gold is usually lower than selling price for jewellers. Accordingly, customers also need to bear this cost at the time of liquidation of their gold.

Also, there is wastage/loss factor in case of jewellery which also impacts selling price. First, let’s understand what Gold ETF & Gold Fund of Funds are. Gold