5 Reasons Why You Should Not Buy Gold from Banks
A lot of buyers prefer to buy gold from banks, especially for investment purposes. It is because banks claim to sell 100% original gold with certifications. While banks may look like the best place to buy gold coins, they are not, for several reasons. At the time of buying gold coins from banks, you may feel like you have made the best decision as they promise 99.9% purity and ease of buying, along with a high premium. However, if you choose to buy gold coins from banks, you will be losing twice. Why are we spilling such harsh truths about banks selling gold coins? Here are the reasons why.
Five Reasons Why You Should Not Buy Gold Coins from Banks
Below are five reasons why you should not buy gold coins from banks ever.
1. Buying Price is Higher than the Market Prices
If you are buying gold coins solely for investment purposes, it is definitely not a good idea to buy a commodity at a higher price that is already very highly priced in the market. All of us are very well aware of the gold rates and the fact that their rates keep rising. When you buy gold coins from the banks, they charge 7-10% higher prices than the market rates. The reason for this is that the gold coins are imported from countries that are well-known for mining gold. These are highly unnecessary expenditures that you do while buying gold coins from banks. It is because there are many reputed jewelers that guarantee the purity of gold that you are buying without charging any premium or making charges.
2. Why Not Buy Gold from Bank? Encashment of Gold is Difficult
Let’s say you have bought gold coins from banks and now wish to encash them. In such a situation, you will find yourself in deep trouble. This is because banks do not take back the gold. If you try selling them at a good jeweler, there are very high chances that they won’t accept it as well. Even if one in ten jewelers decides to buy your gold, you will be getting a selling price that is lower than the price at which you bought the gold coins.
3. Banks Do Not Accept the Gold Coins Back
When it comes to selling your gold coins for cash, you can not return them to banks. The Reserve Bank has introduced this rule wherein banks can not accept gold coins even if the customer has bought the coins from them. This means that you will have to find a jeweler or a pawn shop to sell your gold coins. Also, the jeweler will accept your gold coins at the market price, which is always lower than the price at which you bought them from the banks.
4. Unavailability of Trained Staff to Check the Originality of Gold
When banks import gold coins from other countries, all they look for is a certificate stating the purity of gold. There is no one at the bank who can check the originality of the gold coins that you are going to buy. So, you can never be sure of the quality of the gold because no one has tested it at the banks.
5. Selling Price is Lower than the Buying Price
As stated above, the selling price of gold coins set by the banks is higher. It is because they charge a 7-10% premium on the gold coins even if the making charges on the gold coins are almost negligible. This leads to the buyer paying a price that is higher than the market price of gold for the same level of purity. So, when you go to sell the gold coins in the market, firstly you can not leverage the offers as they are barely any options for you. Secondly, you get a price much lower than the price at which you bought the gold coins.
What are the Alternatives to Buying Gold from Banks?
Now that you are aware that buying gold from banks is such a loss, we would like to present some alternatives to buying gold from banks. These alternatives do not only guarantee purity, and best prices, but also, buying gold in these forms is free from any hassle.
Digital Gold (Our Top Pick)
Digital gold has recently emerged as the ruler of the gold investment market. As the investors are well-aware of the various benefits of buying gold as an investment asset, a large population of them is turning to digital gold. The investors can not only buy gold without any added discomfort of standing in long queues outside banks but also, they can get their digital gold converted to physical gold easily.
Sovereign Gold Bonds
Sovereign gold bonds are another easy way of investing in gold. In these bonds, each unit of bond has a gram of gold backing it. These have been presented as a substitute for physical gold by the government. The fact that they are digital, gives an added advantage to the customers. It is because they don’t have to buy bank lockers to store their physical gold investments and pay an annual fee.
Gold ETFs or exchange-traded funds are yet another way of buying digital gold. These are basically a combination of stocks and gold investments. The funds are backed by a gram of paper gold or dematerialized gold.
Gold Coins from Reputed Jewelers
If you do not want to buy digital gold, you can still buy gold coins. The only thing that should be noted here is that the jeweler you are buying the gold coins from is reputed and very well-known around the country. There are brands running a chain around the country like Tanishq, Joyalukkas, and so on. Buying gold coins from these retailers is the best alternative to buying gold coins from banks.
As you can now see how troublesome buying gold coins from banks may turn out to be, we strongly advise our readers to buy gold digitally. Digital gold has many advantages over physical gold. One of the most important is that digital gold allows you to start investing in gold for as low an amount as Rs. 1. This makes investing in gold accessible to people from all financial backgrounds.