Buying gold coins in India

A couple of weeks back I started investigating at various shops in Mumbai on the price of gold and the transaction cost incurred etc. in purchasing gold coins. I thought I'd share my experiences for everyones benefit.

I first talked to a friend of my wife's who works at a banks bullion department. His words of advise were to purchase from some popular jewellery store notably, Tribhovandas Bhimji Javeri(TBZ) as he said the bank rates of gold are typicall much higher than the actual cost of gold. So promptly I went down to TBZ. What I wanted to purchase was gold coins in denominations of 10gms and 5 gms.
So here's the deal;
Gold coins are charged for in the following way. An X sum is the current gold price and a Y sum for making the gold coins. I looked up the gold price for the day and went down to TBZ. The price was around 6150 for 10gms. One thing to note is that gold price keeps fluctuating thru out the day. Just like prices of scripts in the stock market. However I was told at TBZ that the price of gold was 6400 now that was a huge difference in the current price compared to the price being quoted. I verified by calling a jeweller friend of ours. Interestingly TBZ quoted a coin making charge of approximately Rs. 60 initially, which after negotiation they came down to about Rs. 35. I had no clue that one can bargain on making charges but as usual I did bargain and was pleasantly surprised.

Did I buy gold there, well no cause their price of gold was too high.

Next stop was Ghanasingh which is on Linking road. Here the price of gold quoted was around 6150 but strangely the making charges were quoted at approximately Rs200. My jaw almost fell to the ground. They were charging the same making charges as are prevalent for high end jewellery.

Well this certainly wasn't working out. Next stop I visited an old childhood friend of mine who had a relatively smaller jewellery store. He quoted prices close to the gold price of around 6150 + a meagre Rs. 30-35 for making the coins, this certainly seemed much more reasonable.

Incidentally all the jewellers suggested that one should buy bars of gold instead of coins as the making charges are much lesser. I however had a facination for coins which is fast changing :-)

One more aspect of buying gold I realised was the 1% charged as a service or transaction or sales tax. I forget which one, but just keep that in mind while purchasing gold.

Well the overall experience was overwhelming indeed. But it was a great learning experience about the nuances of buying gold. Especially for a person like me who doesn't really like the color of gold.

Interestingly I heard different versions on the standardisation of gold. Gold comes in two broad quality categories.
1. 22 Carat or 99.5 % purity
2. 24 Carat or 99.99 % purity (also known as pure gold)
(Incidentally, I later discovered that there are more such categories)
However what I found strangely there seems to be no overall certifying authority for gold. That was certainly strange to know about. There is however an agency (Bureau of Indian Standards -BIS) which supposedly is a standard. I'm searching for more information regarding that.

Interestingly I briefly inquired about the value of precious stones. Gold seems to be a better bet in terms of retaining value than precious stones... I frankly however need to do more research on this.

I would surely like to hear about experiences others might have had. It will surely help increase my financial intelligence.

Sanjay Shetty