Indian jewellers roll out schemes to sell gold

March 01, 2009

Commodity Online
KOCHI: Anything gold is a sure bet these days. During recession time, people have started worshipping gold instead of god.

Investors across the globe have already converted all their money into gold by buying ETFs or gold bars or coins.

Sensing business opportunity, jewellers and even the government have now started schemes to lure investors into buying their goods.

Till recently these schemes were not that popular among investors. But, with the gold prices touching unimaginable levels, jewellers new schemes have found many takers.

One of the schemes which has got many investors queuing up is the gold accumulation scheme offered by various jewelers.

India Post, which also sells gold coins, is set to start offering a gold accumulation plan in the next couple of months. Under the initiative, money can be deposited anytime during a month and one would get gold coins or bars in return, instead of jewellery.

Under an accumulation scheme, a buyer pays the jeweller a fixed amount every month to own his/her choice of jewellery on a later date.

The money paid is converted into gold based on the price of gold on the day of each monthly deposit.

The buyer keeps accumulating gold in this way over a fixed period. By the time it reaches a respectable proportion, it will be converted into gold jewellery.

Leading jewelers Tanishq offers Golden Harvest scheme, while others offer schemes called ‘Swarn Savings Scheme’, ‘Gold Saving Account’, ‘Gold Deposit Scheme’ and ‘Jewellery Savings Scheme’, etc.

Interestingly, most jewellers pay a bonus too. The bonus amount gets added to the deposits made and can be used for purchase of jewellery at the end of the pre-decided tenure.

Gold price being so high, saving is better than paying a lump sum and buying gold. Some jewellers also run a kitty, wherein a group of people pool money for 6-12 months and one member gets to use it to buy gold each month and another the next month and so on.

However, the arrangement has a flipside too. Credibility of jewellers is a major issue.

Tanishq’s Golden Harvest scheme is such that if you pay Rs 2,000 each for 12 months, you get a bonus of Rs 1,200. This means, at the end of 12 months, you would have gold of Rs 25,200 (Rs 24,000 + bonus Rs 1,200). Had you put this money in a recurring deposit with the State Bank of India (SBI), at the prevailing rate of 8.5% for a year, you would have earned Rs 26,104 (after compounding quarterly), Rs 904 more than what Tanishq offers.

But then, unlike in the Tanishq scheme, someone going for the SBI recurring deposit would have to buy gold at one go and not at different price levels.

Those looking at such schemes solely as an investment avenue can consider investing in gold exchange traded funds (ETFs).

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