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Gold as Investment


This content originally appeared on DEV Community and was authored by Madhav Ganesan

Key Concepts

Karat

The measure of gold purity, expressed in parts per 24.

Sovereign (savaran/pavan)

The gold sovereign is a British gold coin with a specific gold content.

  • Gold Content: 7.322 grams
  • Gross Weight (including copper): 7.988 grams

Making Charges (Coolie):

The fee charged by jewelers for crafting raw gold into jewelry. It includes the labor cost and design charges.

Wastage (Sedharam)

The additional gold or material lost during the jewelry-making process. Jewelers often charge a wastage fee, which is added to the making charges.

Value added (VA)

It refers to the incremental increase in worth or utility imparted to raw gold through processes such as refining, shaping, and crafting it into products. This value addition enhances the desirability and market price of the gold beyond its base commodity value.

Hallmark

  • A certification issued by the Bureau of Indian Standards (BIS) that verifies the purity of gold. It ensures that the gold content is as claimed by the jeweler.
  • 916 represents the purity

Gold Products

1) Physical Gold

  • Gold Jewellery
  • Gold Coins/Bars

2) Gold Savings Scheme

  • It is offered by jewelers to help individuals accumulate gold over time.
  • Returns are in the form of gold, not cash.

3) SGB (Sovereign Gold Bond)

  • These are government-issued securities that allow investors to invest in gold without physically owning it.
  • These bonds are issued by the Reserve Bank of India (RBI) on behalf of the Government of India.
  • The bond has a fixed tenure of 8 years with an option to exit after the 5th year on interest payment dates.
  • SGBs offer a fixed interest rate of 2.5% per annum on the initial investment amount, payable semi-annually.
  • The capital gains on redemption are tax-free. However, interest income is taxable as per the investor’s income tax slab.

4) Gold BEes (Gold Benchmark Exchange Traded Scheme)

  • It is an ETF listed on stock exchanges.
  • It allows investors to buy and sell units of gold in a dematerialized (demat) form, similar to shares.
  • Each unit typically represents a fraction of physical gold (e.g., 1 gram or a certain percentage of gold).

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This content originally appeared on DEV Community and was authored by Madhav Ganesan