Options for Buying Gold Bars
October 10, 2011 7 Comments
Gold bars require somewhat deeper pockets but they are pretty good value; so if you can afford to pay the entire amount at one go, typically, your local jeweller will offer the best deal.A local jeweller would have sold a 50-gram gold biscuit on January 2011 at Rs 1,03,150.Even here, take the trouble to walk the streets and ask around about prices.They vary by brand and from dealer to dealer. Negotiate.
The next best place to buy these bars is from NBFCs like Muthoot Finance and Mannapuram Finance.In January 2011, a 50-gram gold biscuit from Muthoot Finance used to cost Rs 1,12,842, inclusive of taxes (VAT and service tax),if you bought it outright.These NBFCs also offer you the chance to buy old bars and coins on EMIs.They charge an interest calculated annually.In this case,after making a down payment of Rs 11,750 (10 per cent of the cost), the remaining could be paid via EMIs of Rs 9,356 over a 12-month period.The gold would be handed over to you after you complete the entire payment.The total amount paid through EMIs comes to Rs 1,12,272.Add to it the initial down payment of Rs 11,750, the total cost would come to Rs 1,24,022.
While NBFCs entice buyers with the notion that the price of the bar will be fixed as on the purchase date and the gold prices seem to still be trending upwards, the interest paid will reduce your gains.So buying gold might become simpler through EMIs,but,it is not without its own problems.After all the same bar bought from HDFC Bank would have cost you Rs 1,19,832.Additionally,account holders and priority customers can expect a discount of around five per cent.Some banks also offer loans to buy gold,eg.:http://www.bankofindia.com/starmahila.aspx
But if you absolutely haven’t the means to buy gold at one go,it makes sense to take the NBFC EMI route as their mark-ups on gold seem to be routinely less than the banks and the interest rates and the means of calculating them seem to be the same.Anyways, do the math before you finally decide and do remember to negotiate.Additionally like the jewellers, the NBFCs buy back their bars but not the banks.