As i have mentioned in my previous posts also that we Indians are obsessed with Gold. You might be aware that it is mandatory to provide photocopy of PAN if investment in Physical Gold is more than 50k. Now more and more people are buying Gold Coins (Purchase is under 50k for obvious reasons). Secondly, Thanks to the Relationship Manager of the Bank (Also read Beware of Relationship manager) for pitching gold coins as one of the best investment avenue.
Gold Coins remind me of Mahabharata where Abhimanyu knew how to enter the Chakravyuha but he was not aware of technique to come out of it. Investment in Bank Gold Coins is also same. You are Abhimanyu and you enter the Chakravyuha (Buy Bank Gold Coin) but then stuck and don’t know how to come out of it (Liquidate Bank Gold Coin). I am listing down reasons why you should not buy gold coins from banks.
1. 7%-10% Costlier then Market Rate: Biggest disadvantage is that Gold Coins sold by banks are costlier then market rate (upto 10%). It eats into your hard earned money. Even though Making Charges/Wastage is almost negligible for Gold Coins but premium is charged. Banks may give various reasons like purity, guarantee etc but fact of matter is you are unnecessary paying higher amount.
2. Banks can’t Buy Back Gold Coins: As per RBI regulation, Banks can’t buy back gold coins. If u wish to buy gold coin then its advisable to buy from known Jeweller as they give assurance to buy back at prevailing Gold Rate at the time of Buy Back.
3. You cannot En-Cash Bank Gold Coins: Biggest catch, No one in this world including Jeweller’s will en-cash the Gold Coins purchased from Banks. Even if your lady luck is smiling & someone agree for buy back after hardship then also you will get much lower value in return.
4. You cannot trade Bank Gold Coins: Unfortunately you cannot trade with Bank Gold Coins. Business community will understand, what i am referring to :). Trading community prefer gold coins of known Jeweller.
I will not recommend at all to purchase Gold Coins from banks. If you are planning to buy only Gold Coins then it is advisable to buy only from know Jeweller as they will buy back in future (Just clarify this at the time of purchase). Only disadvantage is that if you change the city or by any chance you try to sell it to another jeweller then also you will get much lower value.
Now you must be wondering what to do with Gold Coins, you purchased from Bank. Answer is very simple you need to exchange them for Jewellery. Also be ready to incur huge penalty in terms of Melting Charges (1.5%-2%), Making Charges, Wastage etc. You cannot negotiate in this case as Jeweller know your limitation very well. In short, you paid almost 10% premium at the time of purchase and Discounting your investment by almost 10%-15% at the time of sale also. Gold Coin is very unique investment as you are paying premium at purchase and discounting at the time of sale.
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