Jagoinvestor

May 20, 2013

Are Gold Saving Schemes from jewelers really worth investing ?

Are gold saving schemes by jewellers really a great investment option? There are huge number of people who become part of gold saving schemes offered by jewellers, assuming that they are amazing deals which they should not miss! There are few advantages and disadvantages about these gold saving schemes. It’s important to understand them before you invest in those.

Ankur asked this simple question on our jagoinvestor forum which triggered this article

Lately there are ads coming on TV abt this Golden harvest scheme (GHS) from Tanishq, where you pay for 11 months and the company will bear the installment for 12 month to buy Gold. Any reviews abt the scheme?

Gold Saving Schemes

1. Most of the schemes are plain money saving schemes

The way a lot of gold saving schemes project their plan is as if you are buying real gold each month, but majority of them are just plain money saving scheme where you deposit a fixed amount each month for X months and in the last month the jeweler deposits the “bonus” installment and then finally you use the money to buy the gold jewelery at the price prevailing at that time! Not at the gold price the time of joining the scheme! So in practice the whole scheme becomes like a recurring deposit where you deposit some money each month. The bonus installment deposited by jeweler makes sure you get a return around 8-10% on the overall installment.

2. You cant redeem Money

Unlike recurring deposits, you can’t use the money accumulated in gold saving schemes for any purpose. The gold saving schemes make it mandatory that you have to buy gold jewellery and only gold jewellery, not even gold bars or coins. So in case you need money for some other purpose, you can’t use it. But you will say that it’s fine, because at times you also are offered “Zero Making Charges” under these schemes, but you miss reading the terms and conditions which says that it’s only on selected designs and models. What if you do not want to buy those designs? In that case you have to pay the making charges which are applicable and what happens if the design and model which you like have much higher price than you have accumulated? In that case you have to shell out more money. The making charges which you will pay will cancel out the 8-10% returns which you make on the whole scheme.

3. Not as safe as Recurring Deposit

Now as you have understood that gold saving schemes deep down are just like a recurring deposit. However they are not as safe as a banks recurring deposit, for the simple reason that jewelers are not as strong financially as banks and some jewelers actually deposit the money they get in schemes in banks as fixed deposits only. Some jewelers might even be using the money for their operating expenses also.

4. Gold saving schemes are designed to guarantee future sales

If you look into the design of gold saving schemes, it’s clear that it’s a way to assure future sales. People join these schemes, start saving money with jewelers and after 1-2 yrs, they will buy some thing from them. So if X people join the program, all X people will buy something at the end.

R.K. Sharma, executive director from PC Jeweller confirms this – “This scheme is a business building programme. By getting customers involved in this scheme, we ensure future sales. A majority of the times, people purchase a jewellery for a higher price than the amount invested. It is a sure shot business opportunity through which we seal our future sales.” – source

Some of the gold schemes in market

  • Gold Harvest from Tanishq
  • Jewels for Less from PC Jewelers
  • Shagun from Gitanjali
  • Kalpvruksha from Tribhuvandas Bhimji Zaveri
  • Gold Tree from GRT Jewelers
  • Jos Alukkas Gold Saving Scheme
  • Kothari gold deposit scheme
  • Gold Schemes – Bhima Gold

When you should join these Gold Saving Schemes ?

So given these fine points, there are few advantages to these gold investing schemes and there are conditions when you might want to invest in those.  The first thing is that, a lot of investors who do not understand what are other kind of options for investment in gold like Gold ETF, e-Gold etc which are popular ways to buy gold online these days. Because of not having full information, investors get inclined to these schemes and invest on the name of “Gold”.  However good part of these schemes is that, because of these gold schemes, they atleast develop the habit of regularly investing some money, which they would not have done otherwise. So these schemes can be your monthly gold investing plan in a way.  These investors will not invest in gold ETF and simple recurring deposits anyways, so its better that they atleast invest in these gold investments schemes by jewelers atleast. So these schemes are good from that point of view.

Another reason when you can look at these schemes is when you have a marriage or function due in next 1-2 yrs and you might want to systematically invest some fixed money for the purpose of buying gold jewellery. Even in that case it makes sense to get into these schemes.

Have you invested in these kind of gold saving schemes online without understanding how it works? What are your comments on these kind of schemes?

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Swapnil
Swapnil
7 years ago

Sir, please help me understand one thing. There is a big jeweler in our locality P and G jeweler.He is offering 4.5% pa interest on gold.He will give you cash for a gold which is lying idle at your home but that gold should be in form of bars or coins. I have come across articles saying that they are not regulated by RBI and in case of some problem (like default) , we won’t be able to turn to Government for help bcoz only SBI is authorised to do so.
What is the correct information ? should we give our idle gold to a jeweler for interest? Is it safe?

gazala
gazala
8 years ago

A jeweler in Pune offers a scheme as Kuber savings. we have to invest a fixed amount of money each month, Has a direct debit facility, at the end of tenure gives you 8 % interest, can redeem in gold vedhani also which can be sold and cashed anywhere. Do you suggest it as a good option ?

Rashmi
Rashmi
Reply to  gazala
8 years ago

Kuber scheme has this facility where gold is booked at the rate on the date of debit of installment every month… Hence considering gold price would increase or even fluctuate this seems better than RD

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8 years ago

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Ahsan
Ahsan
8 years ago

Last month I invested in the Alukas gold scheme wherein I have to pay a certain amount of money every month for 12 months. A the end of 12th month the Jeweler will pay 50% of monthly installment amount & gold jewelry can be purchased. .This month I went to pay the monthly installment & the Jeweler sales person insisted I invest in the upgraded scheme when in you get 100% bonus of monthly installment amount at the end of 1 year.He told me to cancel the existing scheme or leave as it is without paying the installments & the money will remain as it is and can be ustlized with the upgraded scheme at the end of 1 year .No fines will be imposed for non payment.Is it true?Have a feeling I am falling in to a trap & will lose money in the end.Please advise.

anu
anu
8 years ago

This article is so helpful. It had made me understand the economics and business tactics behind the swaying gold schemes in money robbing shops (i mean the jewelry shops)!

Vasan
Vasan
9 years ago

Hi Shyam,

Nathella seems to be better among the 2. After 11 months there is no making charge, wastage or VAT and you can even buy GOLD COIN. Its wise to buy some design jewellery as there is no making charge. No point in buying a coin as the wastage is always very minimal for a coin.

Regards
Vasan

Shyam Sundar A M
Shyam Sundar A M
10 years ago

Hi Manish,

I am very much benefited after reading your article on Credit Card Reward Points & Cash Back Comparision – Unearthed. I am planning to invest in gold so I was searching ur blog thankfully I found this. My question is I am in dilemma of whether to invest in GRT or Nathella . Could you please suggest me which plan looks best according to you, eagerly awaiting for ur reply. Thanks in advance.

SANAL
10 years ago

Dear Friend,

I am doing a same kind of an investment with a jeweler Prince Jewellery. After reading all the commends i am confused whether i need to continue with the same of not. Kindly help me to understand the plan in which i am investing is really beneficial for me or not. i have mentioned the link contains the plan details Please suggest me the right one. I am doing a monthly installment of 8000/- per month from last August.
http://www.princejewellery.com/savings-scheme/swarna-vaibhav.aspx

Below given is the link contains some other plans offered by the jeweler.
http://www.princejewellery.com/savings-scheme.aspx

Ragini
Ragini
10 years ago

Which companies offer Gold saving funds? and which is reliable?

Muthu Krishnan V
Muthu Krishnan V
10 years ago

GRT seems to have enabled online option to pay installments for savings schemes using debit/credit which is a nice feature. anybody tried registering for the same? I tried to but was not successful. Called GRT but the lady could not assist much.

Muthu Krishnan V
Muthu Krishnan V
Reply to  Jagoinvestor
10 years ago

called them again, was informed that for existing subscribers it will become available from next month, hope that happens and I can use my Credit card and add up some points 🙂

Chetan Ambi
Chetan Ambi
10 years ago

Nice article Manish !! Keep it up.

Sanjay
Sanjay
10 years ago

Thanks Manish for this useful article.
But I think investing point of view if we buy gold coins monthly, We will gate more profit than these plans. Because if we see yearly rates of gold are increasing tremendously.
Please suggest as I am planning to invest in gold.

Sanjay

abhijeet
abhijeet
10 years ago

Hi manish,
I could not see your response to one of the comments, and since i am also interested in it, reposting for knowing your comments.
================================================
Sadanand Nayak May 31, 2013 at 11:27 pm
I have chosen a scheme from P. N. Gadgil & Sons.

Here, quantity of gold (in grams) equivalent to your investment amount at the rate prevailing on the day of investment is set accumulated in your account. (Kindly note, the rates are mentioned on their website daily and also displayed at their store).

At the end of 12 months, you will get the total accumulated quantity of gold plus 8% p.a. interest on your savings. You have option to choose, either jewellery or gold coin. You will have to pay for the making charges in case you choose to go for jewellery.

seenujgs
seenujgs
10 years ago

I think, the returns from Bank will be slightly higher interms of the amount.

Seenu

seenujgs
seenujgs
10 years ago

If you compare rate of return from (Gold savings scheme) Jewelers and RD from reputed Nationalized banks, which one to prefer ? Including, the bonus offered by Jewelers for extra one month ?

Srinivasan Narayanan

Nitin
Nitin
10 years ago

It’s really very helpful………….!!!!

Its most important article before investing in the gold.

HEMKUMAR
HEMKUMAR
10 years ago

Dear Manish

GRT jewellers golden seed is one of the schemes which gives a good value for the purchased jewellery. As Mr.Muthu has pointed out earlier your gold is accumulated in weight as per the price of the date of payment of the EMI and at the end of 15 months you can redeem in by purchasing non branded jewels without making charges(value addition) upto 18% and VAT of 1 %. I have done few purchases as gift for my parents and sisters. On an average the non branded jewels value addition averages from 8% to 22% and you restrict your purchase to less than 18% with good planning of the requirement the average value addition comes to 13-14% and VAT exemption of 1%(borne by the jeweller). So the returns are around 15%(annualised 12%). This is an excellent scheme if you overlook the chance of default.

Dhivya
Dhivya
10 years ago

Hi, my 2 cents.
Nathella Jewellers in chennai have 3 types of gold savings schemes.
Option 1: U pay the money for 12 months, 13th month EMI is paid by the jeweller and u buy gold
Option 2: U pay some EMI, for which gold is accumulated as per dat day’s rate .
Option 3: U aim to save some x gms of gold, so every month u pay the EMI as per ur need f gms.
Link:http://www.nathella.net/saving-scheme.aspx

PROs: Has online facility, so its real good to block the lowest rate n accumulate ur gold instantly.
Jewellwry bought out of this scheme dont have VAT, Wastage or making charges attached to them.
Diamond, Ruby/Emerald and antique jeweleery alone is not applicable for dis option.

Offlate they have started children saving plan, with 3 to 5 yrs gold saving scheme.
Is this good??
Seems good to me? am I missing anything?

Vivekan
Vivekan
10 years ago

Dear Manish,

I have a question.

We dont have much ornaments at home. We really need to get some for my wife, we are ok to wait for 15 months.
I have invested in GRT Jewel chit 15 months scheme started before 7 months.
GRT is coverting my money into weight of gold when I pay monthly installments and at the end of 15 months its written in the aggrement that I can walk away with a jewellery equal to the weight of the gold that I have accumulated(provided that the jewellery I select has no wastage more than 18%).
The reason I started with GRT is that I can avoid the hefty wastage they charge.
Do you think what I did is correct ? Kindly advise.

Mani
Mani
10 years ago

Hi Manish…what would happen if the jeweller selling these gold schemes goes through an unfortunate incident of bankruptcy. Is he obliged to pay us back the money that we have invested in these schemes? Does it have the same status as the bonds/NCDs or other loans that a company has taken from public/banks which it has to clear first even before paying off its preferential shareholders when its assets are liquidated?

rgds…Mani