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7 things to know while buying gold coins

7 things to know while buying gold coins

Wed Oct 11 2017


The festive season is here and a lot of us will be out ticking things off our Diwali shopping lists. For many, gold will feature high in their shopping lists as buying the yellow metal is considered auspicious around Diwali especially on the eve of Dhanteras. People buy gold not only in the form of jewellery, they even purchase coins.


For those looking at buying gold coins, here are 7 things you must know.


1. Purity of gold coins

There are two ways to measure the purity of gold coins - Karat and fineness. Karat is the more commonly used measure of gold purity. 24 Karat (KT) is considered to be the purest form of gold which contains 24/24 parts of gold. Similarly, 22KT gold contains 22 parts of gold and 2 parts of other metals such as zinc or silver to make it more durable while making jewellery.


Fineness is another parameter used to measure the purity of gold and is mainly to find the purity of 24KT gold. As per the World Gold Council's website, even 'pure' gold can contain minute amounts of mixed impurities which the manufacturer has not been able to remove. Fineness is defined as weight of precious metal (such as gold) in proportion to the total weight (which includes alloy and impurities). It is expressed in units of parts per 1,000. The purest form of gold, i.e. 24KT, when measured in fineness shows 999.9 parts per thousand of purity.


2. Hallmarking

Government of India has set up the Bureau of Indian Standards (BIS) to ensure that consumers are not cheated while buying gold. BIS certifies gold coins and jewellery by stamping it (embossing its mark on the gold item) to certify the level of purity of the item.


There are five components that are marked on gold, namely BIS logo, purity/fineness corresponding number (for 22KT, 916 is used), logo of Assaying and Hallmarking centre, year of marking, and jewellers identification mark. Effective January 1, 2017 BIS announced that it will be hallmarking gold jewellery only for 22KT, 18KT and 14KT.


(Image credit: BIS Website)


Mehul Choksi, chairman and managing director of Gitanjali Jewels says, "BIS does not hallmark 24KT gold as this is their norm, but you can get it checked through BIS-approved refineries or labs for its purity."


3. Packaging

Gold coins come in tamper proof packaging.​ Jewellers recommend that one should not tear or open the tamper-proof packaging of the gold coin in case one intends to resell it, as the packing ensures the credibility of the purity of the gold coin.


4. Denominations

Usually, gold coins are available in the market ranging from 0.5 grams to 50 grams in weight. So, going by current price of Rs 29,785 (as on October 11, 2017 on the Multi Commodity Exchange), the smallest gold coin you could buy, i.e. of 0.5 gms, would cost between Rs 1,800 to Rs 2,000(as on 11 October, 2017). However, availability of the denomination you wish to buy depends on the jeweller.


5. Making charges

Buying gold coins is relatively easier as compared to jewellery. It offers you the option to buy the purest form of gold in the minimum weight of 0.5 grams with lower making charges in comparison to ornaments like earrings, rings etc. Making (or manufacturing) charges for gold coins ranges between 4% and 11%, says Choksi. On the other hand, making charges for jewellery generally starts at around 8-10% and can go higher depending on the craftsmanship.


6. Options to buy from

Apart from the local jeweller, one can also buy gold coins from banks, the Stock Holding Corporation of India, MMTC (a government-authorised public sector unit for the sale of gold and silver), and non-banking financial companies like the Muthoot Group.


So, how affordable are these gold coins and where can you buy the lowest denomination? Only a few like the Muthoot Group offer smaller denomination coins like 0.5 gms. According to Muthoot's website, it offers gold coins starting from as low as 0.5 grams of 24 KT/ 999 fineness. And at the current price of gold it can cost Rs. 1,800 approximately (as on October 11, 2017). Muthoot also offers coins with different designs like that of Lakshmi, Ganesha etc. and lowest denomination varies according to design.


Banks like the State Bank of India (SBI) offers gold coins with the lowest denomination of 2 gms, according to its website. However, not every SBI branch sells gold coins. Banks sell through their designated branches. Stock Holding Corporation offers gold coins of 24 KT/999 fineness in partnership with MMTC.


7. Ease of selling

If you have bought gold coins or are planning to buy from a bank, do keep in mind that banks will not buy back those coins as per the Reserve Bank of India (RBI) directive.


Usually, it is seen that gold coins or jewellery brought from one jeweller, let us say A, that is sold to another jeweller, let's say B, will fetch you a lower resale amount. "This is because jeweller B pays you only for the gold and not for making charges, administrative fees, and profit margins that you have paid while buying from jeweller A," says Choksi.



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