Things to Know When Buying Gold Coins

In India, many view gold as an auspicious metal that can bring wealth and prosperity. This is one of the many reasons why Indians consistently rank among the top consumers of gold in the world. 

However, tradition isn’t the only thing that draws Indians towards the precious metal. The fact that gold has consistently delivered inflation-beating returns and is viewed as a safe-haven asset during times of market volatility and dire economic conditions also plays a huge part. 

There are many ways to invest in the yellow metal. Gold coins are often one of the most popular choices since they’re easier to store safely and make for good gifting options. That said, it is crucial to exercise caution while buying gold coins to ensure you don’t get misled by unscrupulous individuals. 

Things to Keep in Mind When Buying Gold Coins 

If you’re planning to purchase gold coins, you need to be aware of certain key factors. This will help you make a well-informed purchase decision. 

• Purity of the Gold Coin 

The first factor you need to consider when buying gold coins is their purity level. The purity of gold is measured in Karats. Most gold articles in India are available in three major purity levels – 18K (18 Karats), 22K (22 Karats) and 24K (24 Karats). Here’s a quick overview of each of these gold purity levels and what they signify. 

• 18-Karat Gold – 18K gold articles contain about 75% of gold, 15% silver and 10% copper.
• 22-Karat Gold – 22K gold articles contain 91.70% of gold, 5% silver, 2% copper and 1.30% zinc. 
• 24-Karat Gold – 24K signifies the highest level of purity you can get and contains 99.9% gold. 

The higher the purity level of gold, the higher the price of the coin. Most individuals prefer to purchase either 22K or 24K gold coins due to the higher purity levels and better value proposition. 

• Hallmarking 

The Bureau of Indian Standards (BIS) is a government entity responsible for setting standards of purity and quality for a wide range of products in the country, including gold. According to the directives of BIS, all gold articles must be mandatorily hallmarked by March 31, 2023. The directive essentially prohibits the sale of non-hallmarked gold articles such as coins or ornaments from April 01, 2023.

Hallmarking is a certification process where gold articles are thoroughly tested at an official BIS hallmarking centre for purity, fineness and weight. If the tested gold articles match the purity, fineness and weight claimed by the jeweller, they’re inscribed with the BIS hallmark logo, purity level and jeweller’s ID.  

Therefore, if you’re planning on buying gold coins in the future, ensure they’re tested and hallmarked by an Assaying and Hallmarking centre authorised by the Bureau of Indian Standards. 

• Weight of the Gold Coin 

Gold coins are manufactured in a wide range of denominations, starting from as little as 0.25 grams to as much as 100 grams. Generally, most individuals tend to purchase 1-gram gold coins. However, if you’re looking at gold coins as a way to invest idle funds, it is advisable to opt for the highest possible denomination. Opting for lower denominations would mean having to deal with multiple coins, which can make securely storing them challenging. 

• Making Charges 

One of the major factors you need to look at when buying gold coins from jewellers is the making charge. It is the charge that jewellers levy for making an article of gold. The making charge is typically expressed as a percentage but can also be levied on a per-gram basis. For instance, if the making charge on a gold coin is 12% and the value of the coin is ₹5,600, 

Most jewellers often levy high making charges for gold ornaments since they tend to be very intricate and challenging to make. With gold coins, however, the charges are often very low since it is comparatively easier to make. Depending on the jeweller from whom you purchase, the making charge for gold coins can be anywhere from 8% to 16%. 

• Certificate of Authenticity 

Jewellery stores aren’t the only source of gold coins. In fact, many banks and financial institutions also sell hallmarked gold coins with different purity levels. However, if you’re buying gold coins from banks or financial institutions, remember to ask for a certificate of authenticity. It is a certificate that contains details of the coin, such as the purity level, details of the hallmarking centre and the weight. 

• Bill of Sale 

If you purchase a gold coin from a jeweller, make sure to get a proper bill of sale. The bill must contain details of the jeweller, such as the registered name of their business, GST registration number and address. Furthermore, the bill of sale must also clearly specify the details of the gold coin purchased, including the weight, the current per-gram price of gold and the purity level of gold in Karats. Having a valid bill of sale can make selling gold coins a lot easier in the future. 

• Selling Gold Coins

Selling gold coins in the market can be challenging, especially since the Reserve Bank of India’s rules actively prohibit banks and financial institutions from buying gold coins. That said, you can always convert gold coins into cash by selling them to a certified jeweller.  

Conclusion

With this, you must now be aware of the things you need to keep in mind before buying gold coins. If you find safely storing physical gold challenging, you can always invest in digital gold or Sovereign Gold Bonds (SGBs). With digital gold, you can purchase very small denominations and even automate your purchases. The gold you purchase is stored safely in a secure vault and can be withdrawn at any point in time. On the other hand, with Sovereign Gold Bonds (SGBs), you not only get to enjoy gold price appreciation but are also entitled to a nominal interest of about 2.5% per annum on the amount you invest. 

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