Consumers who cannot afford to buy gold jewelry outright often choose to participate in gold deposit schemes. If you are considering such a scheme, there are a few essential things to know.
Gold is globally recognized as a valuable asset, and India has a robust cultural fondness for it. At the same time, some individuals purchase gold without financial strain.
Others who cannot invest the total amount at once opt for installment plans to acquire gold jewelry over time. These gold jewelry schemes are particularly appealing to such consumers.
Gold Jewelry Schemes
Gold savings or deposit schemes allow consumers to buy jewelry monthly over 12 months. Many gold shops currently offer these schemes.
Typically, consumers can make monthly deposits for up to 12 months, after which they have the opportunity to purchase gold jewelry equivalent to the total amount they have deposited.
Shops may deduct manufacturing charges or depreciation costs from the jewelry purchased after completing the installment program. Some shops offer promotions where, if you pay for 11 installments, they cover the cost of the 12th installment.
After a year, the customer can redeem jewelry corresponding to the total amount deposited over those months. As gold prices have been steadily rising, these schemes attract many consumers.
Profitability of the Scheme
Consumers can quickly check the daily price of gold as shops display this information prominently. To find out the current price, you can even give a missed call to the Indian Bullion and Jewelers Association at 89556 64433 or visit their website at https://www.ibja.co.
Consumers might wonder how shop owners benefit from these schemes when gold prices are public. It’s important to note that, in addition to the price of gold, extra costs are involved, such as manufacturing charges and depreciation.
These charges vary by piece of jewelry and can significantly contribute to the shop owner’s profit. Some schemes may offer zero wastage or make charges for specific designs.
If you choose not to buy these items as part of the scheme, you’ll have to pay those extra charges separately, which could reduce your overall return.
Things to Consider
Limited Redemption: Consumers must buy jewelry from the same shop offering the scheme. Deposits are not refunded in cash but must be used for jewelry purchases.
Understand Costs: When purchasing gold, be aware of purity, depreciation, and manufacturing fees. Always look for ‘BIS’ hallmarked gold jewelry, typically 22 carats. Reducing even 2 carats can make a significant price difference, so you must know the carat quality you are receiving.
Withdrawal Consequences: Before joining, clarify what amount you will receive if you leave the scheme early. This understanding can help prevent financial losses.
Research the Shop: Review the owner’s financial stability and reputation. It’s also advisable to consult previous scheme participants for insights, as many consumers overlook the fine details in the agreements.
If you’re looking to wear gold, purchase jewelry. However, if your interest lies solely in investing in gold, you may want to consider alternatives such as gold ETFs, gold mutual funds, or sovereign gold bonds.