How to buy gold coins in India?

by Manshu on April 14, 2010

in Investments

I have written about investing in gold through gold ETFs, and gold monthly income plans in the past, but there is a more direct way to invest in gold, and that is by buying gold coins. I use the word direct because you buy physical gold, and don’t have to pay fees to the middle-man, thereby eliminating at least one layer in between.

The flip – side is that you will have to store physical gold with you, but most of you would have bank lockers to store jewelery anyway.

Here are a few things you should know about buying gold coins in India:

1. Reputed banks sell gold coins: The most important thing to me is that reputed banks like SBI also sell gold coins, and that reduces the chances of fraud, and someone selling you something which is of less purity than they claim. A lot of banks have entered this space, and they sell gold coins through their branches. Not every branch will sell you gold coins, so you need to go to the bank’s website and find out the closest branch that will do so.

2. Different sizes: Gold coins are available in different sizes, so you can buy the ones that suits your needs the most. The usual sizes are coins of 2, 4, 5, 8, 10, 20 and 50 grams. The coins are 24 carats, and the banks guarantee their purity too.

3. PAN needed if you are buying gold coins worth more than Rs.50,000: If you plan to buy gold coins worth more than Rs.50,000 then the bank will ask you for your PAN details. I don’t think a jeweler will ask for similar documentation, and that might be one reason to go to a jeweler to buy a gold coin.

4. Banks won’t buy – back your gold coin: I have not seen any banks that you can sell your gold coins to. They are happy to sell you their gold coins, but you can’t go to them and sell it back to them. You will have to sell the gold coins to the jeweler, and this is probably another reason for buying gold coins from jewelers in the first place.

5. You might pay a premium for buying gold from a bank: Now, I started off extolling the virtues of buying gold coins from reputed banks, and I will end this post by mentioning that if you compare prices between your local jeweler and some banks – you might find a difference. There will be a difference even when they guarantee the same purity. A lot of people think that this premium is worth it because the price is higher when you go to sell the gold, but that is not always true. You don’t get this premium while selling off your gold coin. In effect, buying gold coins from your jeweler might turn out to be cheaper than buying it from a bank. It is up to you to decide whether the difference in price is worth it to you or not.

These were just some points that you should keep in mind while buying gold coins – I am going to write more about this topic in the future because a lot of people are interested in this, and would love to hear if any of you have had any experience with buying gold coins.

{ 24 comments… read them below or add one }

mona August 26, 2011 at 4:11 pm

Hello Friends,

I want to buy gold. I don’t know where to buy? Could anybody please tell me which one is best a bank, a post office or a local jeweler?

Thanks
Mona

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Murthy September 28, 2011 at 1:39 am

Mona, You can buy Gold coins from Khazana Jewellery. They will charge 2% while selling. But when you give them coins then they will give amount according to the Market rate on that day. But we have to pay cash for coin purchasing. If you want to pay with Debit Card or Credit card then they will charge 1.5 percent extra. More ever in some area’s local jewellers will syndicate and put one price. But Khazana will update its rates according to the Market rate.

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Avinash Taneja August 27, 2011 at 10:32 pm

Hello Mona,

If you want to buy Gold coins from Bank or Post Office, you can compare the rates or other features by cliking on the following link.
http://thebankingbible.com/planning-to-buy-gold-coins-from-banks-just-compare-before-you-buy-1533
Howver, if you want to buy goldcoins from Jeweller, better go to a reputed jeweller.
Regards,
Avinash Taneja

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Hemant wadhwa August 29, 2011 at 1:12 pm

Dear Sir,

I want to know, as banks dont buy back sold coins and we have to go to jewelers, so what are the deductions jewelers make while buying coins from us?

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Manshu August 30, 2011 at 5:00 am

It depends from one jeweler to another, and sometimes they create a bit of hassle as well. You really need to check on this aspect before you buy bank gold coins. A lot of people have faced trouble doing this because first they pay a premium to buy it from the bank, and then they are unable to sell it easily and it becomes a headache.

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Mahe September 4, 2011 at 5:51 pm

Please tell me the differance between 24 carrat postoffice gold ie 99.99% ( reliance gold) price and 24 carrat gold in shop.

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sabir October 2, 2011 at 1:08 am

Dear Sir,
Iwent to enquire about the rate of hallmarked gold jewellery from a jeweller at Lucknow. He was quoting a price which included 17 % as making and hallmarking charges apart from actual cost of 22 carat gold by weight.

I may be wrong, but to me 17 % additional charges in the name of “making”and “hallmarking” seem to be too high.

May I know as to how much should be the ideal “making” and “hallmarking” charges in percentage terms in addition to the actual cost of gold by weight.

Thanks in advance.
Sabir

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Manshu October 4, 2011 at 6:01 am

Yeah it does sound high – I normally hear these charges in the range of 10% but if you are actually purchasing jewelery then I am not an expert on that so can’t say with certainty.

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Ankit October 6, 2011 at 11:13 pm

today i bought a 10grm gold coin 99.50 purity of NIBR from local jeweller shop in thane. after inquiring a little detail from various shops, i found that coins are being sold with calculation of 99.50 gold rate in market + 2% vat + additional charge termed as coining charge, various from jeweller to jeweller.

in my case i was charged 80 Rs. per gram (this is the lowest i found after inquiring 4-5 jewellers). along with the deal jeweller told me that i can exchange this coin with any jeweller, when buying jewellery.

i have few question still to be answered
1. was the deal i had, is a fair deal?
2. when i will exchange this gold coin with jewellery, i am not suppose to pay any vat on that jewellery equivalent to coin wt. am i right or wrong at this point?
3. how the exchange deal will happen if jewellery i select in exchange is of less purity let say, 958 or 917, whereas my coin is 995.

Thanks in advance

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anand October 28, 2011 at 11:30 am

i have seen a number on bank of baroda 10 gm gold bar, i would like to know what is that no.?? is it something like unique code containing detail about gold and does very bank have this code or is it good to but with a code on it?

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sumathi November 4, 2011 at 7:30 pm

How can i buy gold coin by post office
how must should i pay

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Samruddha Salvi November 15, 2011 at 9:22 pm

Well you got interesting write up on the gold coins, though I would personally always suggest for Gold ETF if one seeks an investment.

But it is also to note that very few people know that if one invests in gold as an SIP (by doing monthly investment), we can see that gold has given 19% returns CAGR from 2001 to 2010. In similar time frame the sensex has also given 19% CAGR.

For more you can check: why invest in gold

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Manshu November 15, 2011 at 11:55 pm

What about the ten years prior to that? What was the return in that time frame?

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Samruddha Salvi November 16, 2011 at 12:05 am

Well in that time frame it has given a modest returns around 9-10% … but at the same time one must have invest via SIP to get those kinda returns.. the gold hasnt enjoyed great growth post oil shock of 1980. Its performance has added only in last 10 -12 years.. considering the same gold can always be as an good asset class diversification in the range of 5-10% in portfolio.

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Manshu November 16, 2011 at 12:12 am

That’s an important thing to mention when you talk about just the past 10 years in my opinion.

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Cnu November 23, 2011 at 3:31 pm

How to declare the gold price in daily.

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Cnu November 23, 2011 at 3:32 pm

According to international market

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susan February 16, 2012 at 11:31 am

hello manshu,

I m an MBA (Finance) student. I m planning to do a project on investments and recently there has been an increase in gold investments via etf and mfs and other means, would like to seek ur help as i have been going thrgh this site and its really helping me a lot

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Naresh September 24, 2012 at 11:18 am

hi All,

i am a very new comer to this field and i need your suggestions to me whether i need to invest in gold or not. i am eager to know if i keep my money in investment how it will be.

thanks,
naresh chandra

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Satish Trivedi October 7, 2012 at 10:56 am

i satish6683 buy a 10 gram gold coin shall i buy it frm a goldsmith or frm a bank?? one bank employ told me that gold smith’s gold coins are 999.4 purity and bank’s are of 999.9 purity.i.e for 24 crt..is it true??

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Manshu October 7, 2012 at 7:29 pm

Banks don’t buy back the gold coins that they sell to you and this has been a major problem for people who bought from them because jewelers take a big cut if they buy coins from anywhere else so that’s an important thing to keep in mind. As for purity, I’m not sure, you can ask the jeweler for the same coin that the bank gives and see if they are willing.

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Chris October 19, 2012 at 10:11 pm

Thanks for the info. I am looking at investing in Gold for my retirement fund, so this is useful information to me.

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Abul hasan November 19, 2012 at 8:57 pm

today i purchase two five grms gold coins – comparing market rate it is Rs.4000/ more – what is the reason please explain me (20/11/2012) today gold rate 24c – 3185 but post office charging after discount without tax 10grms Rs.35341/

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G Dutta March 15, 2013 at 2:28 pm

Please help in buying gold coins. Is there any advantage or disadvantage in buying 2 gm coin instead of going for 10 gm??

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