Gold investment schemes bring gold jewellery within reach but read terms carefully

Dhanteras is considered one of the most auspicious times to buy gold, a yellow metal deeply associated with wealth, prosperity, and good fortune.

While many investors now prefer to invest in gold through SIPs in gold ETFs, the festive spirit often brings a renewed desire to buy physical jewellery.

Here’s a look at how gold investment schemes work and what buyers should know before investing.

How Gold Schemes Work 

These plans let you buy gold jewellery by paying monthly installments over a fixed period, with 11 months being a popular option. You pay a fixed monthly amount towards gold purchase. “Gold investment scheme options allow transactions in installments, which avoid the impact of high upfront cost and price volatility in the short term,” says Renisha Chainani, Head of Research, Augmont, an integrated gold platform.

Gold schemes in India allow customers to buy gold jewelry or coins by paying in easy monthly installments over a fixed tenure, typically ranging from 6 to 12 months, including 11 months as a popular option. Customers pay a fixed monthly amount towards the gold purchase, which helps avoid a large one-time payment, making gold buying affordable and manageable.

At the end of the tenure, you can redeem the total installments you have paid to buy gold. Most jewelers will offer you incentives like discounts on making charges and discounts that are paid out as a percent of the first instalment, or in some cases, they pay the last instalment on your behalf.

For example, Senco Gold and Diamonds has a plan where you can pay for 11 months, and after scheme completion, you get a benefit that is equal to 75% of one installment. At Joyalukkas, you get up to 18% discount on the making of gold jewelry. At CaratLane, you can pay EMI for nine months and get the 10th EMI free.

Two Types Of Plans 

“EMI plans for buying gold come in two types. In one type, which you may call open rate plans, the gold price is fixed only at the end when you buy the gold. In the other type, the price is fixed as you make each payment,” says Suvankar Sen, MD & CEO, Senco Gold and Diamonds.

The risk with open rate plans is that if gold prices go up during your payments, you have to pay the higher price at the end. So, it’s important for customers to check how the EMI plan fixes the rate.

“When gold prices stay steady, open rate EMI plans work well. The best approach is to buy gold in stages and pay with clear rate fixes to balance cost and risk,” says Sen.

Gpld prices have been breaking records, recently touching Rs 1,27,247 per 10 grams.

Things To Look Out For 

While some of these, such as waived making charges or an instalment that is paid, can provide small, short-term relief, they may be hidden costs like processing fees or making charges. Also, as we have seen, you will suffer a loss if gold prices go up in open rate plans. Also, remember, once you commit, you cannot change the instalment amount.

“A consumer should evaluate delivery or non-delivery timeframes and/or refund or non-refund clauses to ensure a process that is transparent and flexible and be clear on the obligations before entering into a gold instalment scheme arrangement,” says Prithviraj Kothari, Managing Director, RiddiSiddhi Bullions.

Set Clear Spending Limits Before Festivals

“Setting spending limits, based on the goals of the budget, is essential for purchasers. Those limits should also meet the need for essential purchases and possibly a small amount of money for saving or long-term investments prior to each festival,” says Chainani.

Allowing for a small (and fixed) percentage of remaining discretionary funds to purchase a piece of jewelry can allow for the purchaser to feel they are still spending within reason while not impacting regular spending.

Also, remember that while gold schemes can serve the purpose of owning jewelry or gold coins, they do not serve the purpose of investing in gold, for which gold ETFs are a smarter option.