Is It Strange to Buy Gold Coins as Investments?

While many people out there have been known to go down the path of preaching, saying “seize the day” and “Don’t let money stop you!”, but they never mean to say that you should spend all your money in enjoying the daily fruits of life. When one gets their salary - their very first salary, it is advised that they spend only half of their after-tax income and save and invest the rest of their money. It is true as well that after all the necessary expenditure and debt repayments; you should invest most of your money if you want to grow financially. Apart from the traditional investment vehicles, there has come a new trend in the market of buying gold coins as a form of investment.

Gold Coins against Traditional Investment Methods

Most of the investment methods like stocks or bonds offer a return of the investor’s money only if they have been patient. The return amount takes time in developing and building up. There is also a good chance in case of mutual funds that you will lose your principal amount to a great extent if your company’s stocks were to fall. Gold, as a form of investment, on the other hand, will always give you hefty returns depending on the market rate of the metal then. And since the price of gold has seldom gone down, you can rest assured that your investment won't go into loss.

At this point, an investor has a few options as channels for purchasing gold coins. The two prominent ones are banks and jewelers. While most banks will be selling and accepting gold at the market price (with a nominal service charge, obviously), jewelers have been known to hold certain reservations. Many jewelers won’t even accept gold coins sold from their house at the full market rate. Moreover, when the jewelry and the coins are compared, the former may see a decline in its value over time. On the other hand, the value of coins only appreciates over time.

The Purity of Gold Coins

Units such as karat and fineness are generally used to determine gold’s purity. 24 karat (KT) gold is the purest form of gold. 22 karat gold contains about 22 parts of gold and two parts of some other metal like copper, zinc or silver. The mixing is generally done to make the metal stronger and more durable because 24KT gold jewelry can break from joints if the casting is weak. The fineness of gold only concerns itself with the 24KT gold variety. Even the 24KT pure gold can contain certain impurities. The fineness of gold can be calculated by determining the weight of gold and the impurities that might have crept in during the process. It is the proportion of the two weights which gives us the metric.

Nonetheless, if you find yourself unable to find 24KT gold jewelry, you can always find 24KT gold coins.

Hallmarking of Gold Coins

Apart from the karat and the fineness metrics, there is yet another method of determining the quality and the grade of the gold manufactured in India - one must also check if the gold coin they are purchasing is hallmarked. The government of India’s Bureau of Standards marks gold jewelry, bars, and coins as authentic to make sure that the customers don’t get cheated while buying the precious metal. The hallmark is, as its name suggests, a stamp embossing the metal at its surface, marked to certify the level of purity of the gold item at hand.

In recent years, certain components have been included to hallmark a gold item. These include the well-known BIS logo, a mark telling about the purity of the metal in terms of karat and fineness, the logo of Assaying and Hallmarking center, and the jeweler's identification number and mark. Additionally, in the former years, there was yet another component in the hallmarking system which told the year of the hallmarking. Hallmarking is only done for the specified karats of gold, but a serious investor can always approach the BIS for determining the purity of any other kind of gold as well.

Gold Coin Denominations

The gold coins in the Indian market are manufactured and available from 0.5g to 50g in weight. The gold price in Mumbai today is in the range of Rs 31,000 - Rs 36,000 for 10g of gold, the smallest gold coin would cost an investor a little less than Rs. 1800 without taxes. It is advisable though that all the gold coin purchases be made ensuring proper packaging of the metal to avoid any kinds of fraud related to or damage to the metal. A tamper-proof packaging is a physical guard against counterfeiting, and hence an important part of the whole process. It also goes without saying that if one wants to make substantial gains in the gold market, they should buy more gold.

It is also noteworthy to mention here that buying or investing in gold coins is an easier process compared to jewelry. The coins offer you the option to buy the purest 24KT gold, and one only has to pay close to 8% for the making charges, charges which go higher with the craftsmanship involved in making jewelry products like rings and necklaces.

Options to buy Gold Coins From

There are more than just a few channels to buy gold from, but only limited sources are secure and legal. In India, one can buy gold coins from a local jeweler, from authentic online sellers, the Stock Holding Corporation of India, the MMTC, which is another government-authorized public sector unit looking after the sales and marketing of gold and silver, and other private third-party companies like Muthoot Finance. With the current gold rate in Mumbai ranging as high as almost Rs. 36,000 for 10g, one must be intrigued as to what leads to such high valuation of the metal and how or why has the rate been ever increasing.

With denominations ranging in 5g, 8g, 10g in most banks and jewelers, if one wants to give smaller denominations, they can always go for companies like Muthoot group to buy 0.5g of gold as mentioned on their website.

Ease of Selling Gold Coins

So now one has purchased gold coins with their hard-earned savings. It is time to wait. If one loses patience over matters like investments, they might never make any substantial income out of it. But when you feel the time is ripe, you should go with your gut and make the sale. Selling your gold coin comes with certain clauses that one needs to be aware of. For instance, if you have purchased a gold coin from a bank, they can’t accept it back as per Reserve Bank of India’s directive. Moreover, gold purchased from a jeweler when sold to another merchant will fetch you a smaller resale value depending on the market price of gold at that time. You should try to sell your gold coin back to the same merchant you purchased it from in the first place.

The Final Words

Gold coins are a new trend in the investment market. Not only are they more reliable than other forms of investments like stock holdings and real estate, but they also require the least bit of research on the customer’s part and guarantee a good return in maximum cases.


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