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Top Tips To Buy Gold (1)

Important tips on how and when to buy gold

Indians love gold and so they keep finding opportunities to buy gold. Many experts have predicted that gold will do better than most commodities and investments. It is also important to note that gold prices do not always go up and there are times when gold prices have fallen down as well. So it is important to understand all the risks before investing in gold.


In view of the same, let us look at some of the important tips on how and when to buy gold –

Make the decision to buy gold.

Elders always advise us that it is wise to buy gold, whenever you can. Especially in uncertain times, wherein other assets like investments in the stock market, real estate, currency etc. underperform, the prices of gold and silver tend to rise.

Thus it is very important to buy gold in smaller quantities regularly, especially when the prices are down, and keep adding the same to your portfolio. The process of buying gold in small quantities as compared to a single large transaction, benefits the investor as you get a lower average price. You can also apply the same aspect while selling, so that you can maximise your return on investment.

Understand the different types of gold.

Gold is available in different forms. You need to buy gold in a form that will suit your purpose. Gold bars and coins are mostly used for investment and gifting purposes, while gold in jewellery is used for personal use. Today, you can also buy gold in the electronic form, which will save you the hassle of maintaining and storing it.

Top things to be kept in mind while buying gold.

After making the decision to buy gold, there are some things that you need to keep in mind –

Check the purity of gold.

One of the easiest ways to check the purity of gold is to look for hallmarking. The hall marked piece of jewellery tells you the official proportion of the metal. When you are buying multiple pieces of jewellery like earrings, bangles, chains etc., you need to check the hallmark symbol for each piece.

Some important points to be noted are –
  • The first symbol in the triangle will denote that it is certified by the Bureau of Indian Standards.
  • The second symbol will be the alphabet stating the year of hallmarking.
  • The third symbol will indicate the carat value of gold.
  • The fourth symbol will identify the jeweller.
  • The last symbol will indicate the completion of the hallmarking process

Check for the carats.

Gold is measured in carats and 24 carats is the purest unalloyed form of gold. 24 carats is only seen in bullion bars. 22 carat gold has 91.6% of gold purity and most of the high quality jewellery is made of 22 carat gold only. The next one is 18 carat gold, which has about 75% of gold purity and is used mostly for jewellery, wherein gemstones are encrusted. Anything below 18 carat should not be bought as it is not pure and does not have any resale value.

Check for the authentic certificate.

 While buying gold, check for the certificate of authenticity. If there are any precious stones or gemstones in the jewellery, ask for a separate certificate for the gemstones. It is also important to check the buyback policy in detail before buying any high end jewellery.

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Gold jewellery by a specific brand will carry a premium pricing.

When you are buying jewellery of repute brands, you will be paying more than the normal gold price. The unique and complex designs of branded jewellery will command a premium pricing. At the same time unique and rare heritage or ancestral jewellery, will also command a premium price. While buying or selling of gold jewellery, all these aspects need to be kept in mind.

Be clear about the making charges.

Making charges also increase the cost of buying gold jewellery. Making charges depend upon the intricacy or complexity of the design. The mode of production also impacts the making charges. Handcrafted jewellery will always be more expensive than machine made jewellery.

Now let us understand how the gold price is fixed –

London is the global centre for spot gold. Nearly 85% of the global trading volume of gold is done there. The London bullion market association (LBMA) gold price (London price) is fixed twice a day – at 10.30a.m. & at 3p.m. Apart from London, Shanghai and New York are the other two major centres for gold trade, wherein gold reference prices are also decided.

LBMA gold price is decided by 13 participants of the Intercontinental Benchmark Administration (IBA). Banks  like  the State Bank of India, Nova Scotia etc., buy gold at the LBMA gold price, add import duty and VAT and then sell the gold to the local jewellers.

Every day trade bodies take the LBMA gold price or the trading price at the New York Mercantile Exchange to reach to a base reference price, which is then adhered to by their members. The actual price we pay includes the making charges of jewellery and so it is higher than the daily gold prices published in the newspaper.

Finally, gold is an investment and thus it is important to ensure that you take appropriate measures to understand the risks, benefits and other important aspects before investing in gold.

Please read our earlier article Invest in gold the right way

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