CapitalMind CEO and founder Deepak Shenoy sparked a conversation on X platform (formerly Twitter) over the feasibility of gold jewellery as an investment option because of the "random making fee" involved.
He said the cost of 'making' of 25 grams gold at a jewellery store is Rs 11,982 and the gold itself costs Rs 1,59,763. Thus, the making charge comes to 7.5% of the total bill. He said that considering the 7.5% making charge and 3% GST, one needs to make 11% gain to break even if they wish to sell the jewellery.
"For 25g gold, - the cost of "making" is 11,982. Gold cost 159,763. You lose 7.5% to some random making fee as soon as you enter. If you sell back the gold IMMEDIATELY, you will lose 7.5% of the making charge, 3% GST. You need to make 11% to break even," posted Shenoy on X.
He said that, if asked, he would suggest anyone to buy Sovereign Gold Bonds (SGB) "if they are desperate for gold" or else they can invest in stock markets.
SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The bond is issued by the RBI on behalf of the Government of India.
The Reserve Bank of India (RBI) on November 17 said the price for premature redemption of Sovereign Gold Bonds (SGBs), due on November 20, will be Rs 6,076 per unit. "The redemption price for the premature redemption due on November 20, 2022 shall be Rs 6,076 per unit of SGB, based on the simple average of closing gold price for three business days — November 15, 16, and 17, 2023," the RBI said.
Shenoy's X post was discussed by netizens for both the merit and lack of merit in the arguments that he's making.
"Making charges are different for different designs. Machine made are cheaper with ugly designs. Man made are beautiful, intricate and delicate. That's the Labor cost that Titan is paying to goldsmiths. If you have Tanishq gold, you don't have to worry about the purity. You can sell them at local market and get a good price and I don't understand why people buy jewelry to sell it soon! Gold jewelry is an investment that u can use it every now and then. Better than investing 20k on fake Kundan / artificial jewelry. In fact buying silver jewellery is a better investment than fake ones. In Gold business, the margin comes from making charges," said an X user.
"Buying gold is like buying a stock at market price instead of face value. Market price is inflated, still people buy with the hope that price will appreciate. The question is how long can you wait. If your answer is at least 1 generation, you will get good return," quipped another X user.
Gold prices eased by Rs 50 to Rs 61,770 per 10 grams in the national capital on Monday in line with weak global cues. In the previous trade, the precious metal had settled at Rs 61,820 per 10 grams.
Silver also declined by Rs 300 to Rs 76,000 per kg.
Traders will monitor the Federal Open Market Committee (FOMC) meeting minutes, which will be released on Tuesday, for further direction on precious metals.