The festive season, especially Dhanteras, has traditionally been considered an auspicious time to invest in gold. While there are various avenues available to invest in gold, buying physical gold is among the most popular ways of investment. However, there are certain aspects to purchasing gold which you must know beforehand, to ensure you get the best value. So, here are some important tips which you should keep in mind when buying gold this festive season. 

Purity and Certification

The value of gold depends, among other factors, on its purity. Gold Jewellery is typically available in two variants: 22 karats (91.6 per cent pure) and 24 karats (99.9 per cent pure). To ensure you are buying the right variant, identify your needs and investment goals beforehand. Also, check for the BIS (Bureau of Indian Standards) hallmark on gold jewellery or bars, which is an authentication of the gold's purity. If you're buying gold primarily as an investment, remember that 24karat gold typically has a higher resale value than 22karat gold due to its higher purity.

The table below offers a comparison between the different purity levels of gold available today.

Karat

Purity

Characteristics

Durability

Common Uses

24K

99.90 per cent

Highest purity, very soft

Low (soft)

Investment (coins, bars)

22K

91.67 per cent

Most popular for jewellery; strong yet retains high gold content

Moderate

Traditional jewellery

18K

75 per cent

Good balance of durability and gold content; allows for intricate designs

High

Everyday wear, intricate pieces

14K

58.33 per cent

Less common; durable and often used for modern designs

Very high

Contemporary jewellery

Making Charges

This is the cost of labour involved in making god jewellery. Though these charges fluctuate based on current gold prices as well as the design. For instance, gold coins or bars have lower making charges than jewellery, making them a more cost-effective investment option. However, in order to avoid being overcharged, it is advisable to compare making charges of multiple jewellers to ensure you get a good deal. However, making charges do not influence the resale price of gold jewellery.

Handmade vs Machine-made Jewellery

With demand rising, machine-made jewellery is becoming rather common. Machine-made pieces typically have lower making charges compared to handcrafted ones, making them more cost-effective. As a result, these pieces can often be less expensive than handmade jewellery, which can also help you save money on your purchase.

Market Prices and Festive Offers

Since gold prices fluctuate everyday based on global market trends, it is important to monitor rates before buying. Some jewellers offer a price lock feature, allowing you to lock in today’s price for future purchases. Many jewellers also offer discounts, extra grams of gold during festivals, or waive making charges to attract more customers. Find out about such offers to benefit from them.

Verify the Weight

Gold jewellery is typically sold by weight, with heavier pieces carrying a higher price tag. When gemstones like diamonds or emeralds are set into the jewellery, they add to its overall weight. However, since jewellers weigh the entire piece, including the gemstones, you must be careful to avoid over-paying for gold that hasn’t been used in the jewellery.

Check about Buy Back Offers

Before purchasing gold, ask the seller about their exchange or buy-back policy. This typically involves trading in your existing jewellery for updated designs without losing the value of your gold. Many established jewellers offer guaranteed buyback at the prevailing market rate with minimal deductions.

Storage and Insurance

Storing physical gold, especially in large amounts can be risky and it is advised to keep store it securely in a home safe or bank locker. For added protection, insure your gold against theft or loss. Some jewellery stores do offer 1-2 years insurance on the purchase of gold, which can be worth considering.

Invoice and Documentation

Always buy gold from a reputed jeweller and request for a valid invoice. This is an important proof of authenticity and necessary if you wish to resell the gold in the future. The invoice must include details like the purity, weight and making charges of the gold.

Off-season Purchase

Gold purchases tend to surge during specific times of the year, such as the wedding season and festivals. This increased demand often drives up the precious metal's prices, making purchases during such peak periods more expensive. For a cost-effective investment, consider buying gold jewellery during the off-season when the demand and price isn’t as high.

Given the symbolic importance of gold in India, it is prudent to plan your investment considering the tips shared above. Gold is also a good investment for diversifying your portfolio and it is advisable to limit your exposure to 5-10 per cent of your portfolio.

The author is the AGM, Communication of Bankbazaar.com. This article has been published as part of a special arrangement with BankBazaar.