What to keep in mind while buying physical gold or gold jewellery

Buying gold is not just like buying fruits, vegetables, apparels or grocery. Buying pure gold or gold jewellery is an investment in a liquid asset which can be encashed at any time in case of need. While buying pure gold or gold jewellery, people get confused about the purity, carats, prices, making and polishing charges if purchasing jewellery due to ignorance of basic facts about gold. This article tries to provide you with some quick tips to be vigilant.

Introduction to Gold

Gold is bright yellow metal having lust and attraction and it does not get oxidized in air or water. It maintains its shape and attraction over a period of time. 1 gram of gold can be beaten to acquire size of 10000 square centimeters.
Gold was used as medium of monetary exchange since time immemorial as gold coins were traced dating back to 700 BC. With the passage of time convertible gold standard currencies became the medium of monetary exchange meaning that equivalent in gold will be returnable but after the World War II the countries inflated their currencies through fractional gold standards which meant that their currencies will be backed by small fraction of Gold Reserves instead of 100% Gold reserves. World currencies were pegged to the U.S. dollar at fixed rates. The U.S. promised to redeem dollars in gold to the central banks of other countries. When the United States ended the convertibility of the US dollar for gold in 1971 the system collapsed.
India and China alone account for approx. 50% of world gold consumption, each contributing approximately 25%.

Hallmarking of gold jewellery by BIS – Purity of Gold

Basically there is no gold of 100% purity and purity of gold is measured in carats. 24 carat gold is considered to be pure gold. It is said that to extract or produce gold equivalent to one finger ring of gold about thirty tonnes of used ore is dumped as waste consisting of many heavy elements such as cadmium, lead, zinc, copper, arsenic, selenium and mercury which is major source of pollution of water unsuitable for human consumption. Silver and/or copper are mixed with gold to make an alloy and its purity in gold measured in carats gives the percentage purity. For example 18 carat gold, is of 75% purity calculated as [18/24] x 100 = 75%, consists of 75% gold, 12.5% copper and 12.5% silver as per standard norms. Hallmarking certifies the purity of the gold as per BIS standards. Hallmark Jewellery

999.999 (The purest gold ever produced)

999.99 (The purest type of gold in the market)

999.9 Four-nine purity)

999 (equivalent to 24 carat)

958.3 (equivalent to 23 carat) = BIS Hallmark 958

916(equivalent to 22 carat) = BIS Hallmark 916

875(equivalent to 21 carat) = BIS Hallmark 875

750(equivalent to 18 carat) = BIS Hallmark 750

585(equivalent to 14 carat) = BIS Hallmark 585

375(equivalent to 9 carat)= BIS Hallmark 375

Understand about weights and measures of Gold

Basic unit of weight used for dealing in gold is troy ounce. 1 troy ounce is equal to 20 troy pennyweights. Jewellers internationally use pennyweight (dwt.) which is equivalent to 1.555 grams as common unit of measurement.

1 troy ounce = 31.1034 grams

1 troy ounce = 480 grains

1 kilogram = 32.15 troy ounces

10 tolas (Indian System) = 3.75 troy ounces

Gold Prices – history and trend of prices

Gold price history charts give a fair idea about the trends of gold prices. Recession hit and bearish stock markets tend to increase the gold prices. Indian gold market is also affected by the fluctuation of prices of US dollars. Strong INR decreases the prices of gold in INR and vice versa. Government import policies, local economic conditions and seasonal sale also affect the supply and demand. But it has been observed during the last one century (100 years) that gold used to be the safest haven for investment over a long term plan. Gold prices started increasing continuously since 2006-07 to 2010-11 and stabilized at the end of year 2011.

Buying gold from local jewellers or goldsmiths – Tips

Ask for hallmarked jewellery only with 100% buy back guarantee throughout India. Look for the Hallmark logo and purity.

Convert the prices as per purity. If the market price for standard (pure gold) is say INR 30000/- per 10 gram then to arrive at price for 22 carat (BIS Hallmark 916) will be [22/24] x 30000 = INR 27500/- or [916/999] x 30000 = INR 27507/- which is approx. = INR 27500/-.

Check for zero error in weighing scale. To have accurate weight following procedure can be adopted.

Weigh some item and note down its weight.
Put the weighed item along with the item to be purchased and note down weight of both the items.
Subtract weight at Sr.No.1 above from weight at Sr.No.2 to arrive at the correct weight.
Weighing the item, to be purchased, alone and difference of (3) and (4) will be zero error of the weighing scale.

Account for the weight of the embedded stones while making calculations.

Polishing charges are levied by the jewellers on account of unrecoverable wastage during making process and making charges are the labour charges for the article to be purchased. It varies from jeweller to jeweller under local market conditions. Never agree to make charges in terms of per gram of jewellery. However wastage, on account of grounding, moulding, roughly between 10% to not more than 15% of pure gold is reasonable as per items. For example there will be less wastage in case of bangles and bracelet (Kara in Hindi) as compared to necklace with micro level designing.

Always obtain the bill for the item purchased depicting weight, making charges and weight of embedded stones.

Future of Gold

Due to SDR's, special drawing units introduced by IMF and the world wide discussions being initiated to evolve uniform Global Currencies or Regional Currencies like Euro, it is quite possible that Asian countries may come up with their own regional currencies for bilateral or multilateral trade transaction in the Asia Pacific Region. In such a scenario the monetary value of Gold may vanish with the passage of time as the major gold consuming countries' taste for gold jewelry is shifting from Gold jewelry to Diamond jewelry. The author can foresee that in the near future there might be tendencies among Indian households to pledge their gold to obtain Gold Loans and the Gold Loans may also force the Banks to pass through Gold Redemption Crisis on the same lines as Mortgage Redemption Crisis faced by the American Banks in 2007 and 2008 during the great American Depression when more than 30 Banks including Lehman Brothers failed in America.

Article by Ashok Goyal
Ashok Goyal joined ISC in 2012. He is Leading CIBIL Consultant in India after having retired as Chief Manager from Punjab National Bank, Experienced Blogger and Adsense Publisher.

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What is the game of percentage in the business of gold?

The jewellers sell ornaments to his customers saying that the gold from his shop is the purest in. While the truth is that on general basis, gold is not available in the market in more purer form than 85%. The entire market of gold is based upon ‘percent’. No matter what the rate of gold in the market is, the jewellers must get the benefits in percent while the customers either sell or purchase ornaments. This article discusses this arithmetic of ‘percent’ in the gold business at play.

Things to be remembered while purchasing gold

We all are aware of the fact that India is largest importer of gold. By tradition we use gold as ornaments and due to undecidable condition of other markets it has become one of the most preferred choice by investors. In this article I will explain thins to be considered while purchasing gold? What is meant by carat? How gold is measured? How the purity of gold is measured? And other important things related to gold.

Useful tips for purchasing gold

Planning to buy gold? Check out this article for some tips & precautions you need to take while purchasing gold items, including jewellery.

How To Purchase E-Gold In India?

At one time, buying gold meant buying ornaments from jewellery shops or from banks. In recent days this trend has changed and new ways of buying gold have emerged. These included buying gold in demat form, gold etf, etc. The latest one is trading in E-gold. This article will give you guidance tips on investing in e-gold in India.

More articles: Buy Gold Gold Purity Gold Gold Price

Comments

Author: Spider Man13 Apr 2013 Member Level: Silver Points : 2

Good information. So many doubts about purity of gold and its pricing mechanism on the basis of purity in terms of carats resolved. I think this carat system does not work for pricing of diamond jewellery. If possible write something about diamonds also.

Author: Seema Mittal25 Nov 2013 Member Level: Gold Points : 4

Ashok Goyal, Your article throws lots of light on gold, its quality, weight, price & purity. When we purchase gold we feel very confuse about its purity, weight, price sometimes about its color also. After read this articles some doubts are cleared. We should keep all above point in our mind when we are to go to buying gold because gold is not only jewelry but also a good investment option for future. Women much like gold because it is used as ornaments as well as assets. According to me “It is very precious article regarding knowledge of gold".

Author: K Mohan30 Nov 2013 Member Level: Platinum Points : 4

This is the good article posted by the author and appreciation for that for giving in depth view on how to make guarded investment in gold and jewels. Surely for middle class people investing in gold is the one time exercise and they must make sure that they are purchasing genuine gold which can be of help in future. In this regard I they must approach the reputed shops which are doing this business with good client record. Normally small gold shops cheat the customers in carat counts and that wont happen with reputed shops. Moreover the jewels must be purchased at those shops which guarantee same amount warranty in future.

Author: Ashok Goyal30 Nov 2013 Member Level: Gold Points : 3

Thanks for the encouraging remarks by the readers. Soon in depth study article on Diamonds, Cents, Carats, their valuation, certification, resale opportunities, myths and doubts is under preparation and will be served in an plateau with all doubts cleared about the diamond jewelry. Stay connected with the author.

Author: J.B.Gupta24 Jan 2014 Member Level: Bronze Points : 2

Hallmark is no doubt a sign of purity but marking on the hallmarked jewellery can also be copied and embossed. What to do if the other jeweller, at the time of selling, informs that hallmark on the jewellery is faked.

Author: Ashok Goyal04 Mar 2014 Member Level: Gold Points : 5

Update by the author on 5 marks of Hallmark before buying jewellery:
1. Purchase Jewellery from BIS licensed jewelers.
2. Hallmarking charges are just Rs.25/- per article of jewellery. Do not pay more.
3. Buyers can verify the purity of hallmarked jewellery at any BIS recognised or referred laboratories as available on www.bis.org.in
4. Verification Charges by such recognized and referred labs are just Rs.25-00 per sample or article. Do not pay more.
5. Do not be misled as there is nothing like instant Hallmarking as it takes minimum 5 to 6 hours for the hallmarking labs to check the purity of the jewellery before hallmarking.
5. Use Magnifying Glass to check the originality of the Hallmark.

There is Compensation Policy if Hallmarked Jewellery is found to be of lesser purity.

Author: Ashok Goyal22 Apr 2014 Member Level: Gold Points : 7

@J.B.Gupta,

What to do if you find that Hallmark is faked on your Gold Jewellery?

If you come to know or suspect that you might have purchased some fake or counterfeit gold jewelry with faked Hallmark then take it is better to take it to your local trusted and qualified jeweler where he or she will be able to test the item and confirm if it is faked or genuine. But never try to resell your faked hallmarked gold back into the market as it is a criminal offence to trade in counterfeit or fake goods. Just write down an article on your experience as to how you came to the conclusion that the jewelry was faked by sharing your knowledge on IndiaStudyChannel or WebQuestionAnswers and telling the public at large about few tips to differentiate between the original and faked hallmarked jewelry. Make all out efforts to recover back your hard earned money. However if you are not in a position to get back your money either from jeweler or under the compensation policy of Hallmarked Gold then inform your local police station as to where and when you purchased the item so that they might be able to help recover your money.

Author: Aditya Mohan30 Jun 2016 Member Level: Gold Points : 0

Nice article! Would be super helpful.

Author: Ashok Goyal01 Jul 2016 Member Level: Gold Points : 2

@Aditya Mohan, Thanks for liking. I would like to add here that the Gold Prices which were stagnant since November,2011 and the prices of gold in the international market came down from $1700+ per ounce to $1000 per ounce has started moving up for the first time and risen to more than $1300 per ounce. Due to the Brexit phenomenon the US $ has hardened and there is every likelihood of prices going up till the Deepawali 2016 in Oct/November,2016.

Author: Chitra07 Dec 2017 Member Level: Gold Points : 5

Never approach popular and renowned shops for purchasing gold as they will charge huge amounts as making charges. Try small trustworthy jewelry shops as the making charges here will be comparatively very less. You can buy additional grams of gold with the money you spend on making charges. Also, if you want to cut down on making charges, go for the simple designs. Complicated designs will have high making charges and will not be suitable for daily use. Hence decide whether you are intending to purchase jewelry for daily use or not and accordingly choose the design. Now almost all jewelry shops are offering 916 hallmark gold.

Author: Umesh14 Aug 2018 Member Level: Platinum Points : 3

The author has given good guidelines for understanding the gold quality when going to purchase gold.

Gold is a wonderful commodity. It's shine and lustre always attracts the attention of people. No other metal can replace gold when it comes to jewellery.

Due to its use in jewellery, it is always in demand. One thing which I have noted is that for the last few years gold prices are stagnant and hovering around Rs 30000 per 10 g. So there is no appreciation in gold seen from the investment point of view during the past few years.

Now Govt has floated gold bonds also in the market which give an assured return of 2.5% in addition to any increase in its' price in long run. So people are going for this mode also.

Author: Neeru Bhatt16 Aug 2018 Member Level: Diamond Points : 1

It appears that the craze for gold has decreased. The stagnation in its price and people going for gold bonds are the main reasons behind it.

With more people going for mutual funds and with a hope of rising equity market, the investible funds for the gold are likely to shrink further.

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