Gold, Guest Blog

Is it Worth Investing in a Gold Scheme?

Buying, selling, or trading in gold has always fascinated people. Time and again, gold has proved itself as a perfect hedge against inflation. That’s why almost all people want to invest in gold in an attempt to secure their future. The increasing demand for investment in gold has encouraged market players to come up with modes, schemes, and investment plans to encourage people and facilitate investment in gold. Gold scheme is one such investment idea.

What is a Gold Scheme?

A Gold Scheme or a deposit scheme is an investment idea, where the investors can deposit their gold with jewelers or banks for a certain period of time. At the end of the term, the investors get a higher quantity of gold as interest for their investment. Sometimes jewelers offer the investors a fixed monthly amount and return the original quantity of gold at the end of the term.

Benefits of Gold Saving Scheme

The main objective of a Gold Scheme is to mobilize the gold lying idle in our homes or bank lockers. This scheme makes gold available for loan and thereby reduces dependence on importing gold. This helps us save a lot of foreign exchange and control gold prices to some extent. Different jewelers and banks offer a different version of the gold saving scheme. 

How Does the Gold Scheme Work with Banks? 

The Gold Scheme was announced in the 2015 budget to encourage investors to take out their idle gold assets and use them in a more productive manner. The banks have been allowed to accept gold and loan it to jewelers or use it for some other purposes.

The Gold Scheme works in the following manner in banks:

  • To begin with, the investors are required to visit approved collection centers, show the proof of ownership and purity of gold and obtain an approval to deposit their gold.
  • These collections centres take the gold. Once the customer gives their consent, they pass it on to gold refineries in order to melt it.
  • The collection centres issue a certificate for the amount and quality of gold deposited. This certificate can be used to open a Gold Savings Account.
  • The gold refineries store this gold at a fee, which is decided between them and the bank. Customers do not have to pay anything for this service.

Salient Features of Gold Scheme by Banks

The main features of a Gold Scheme are:

  • An investor may deposit a minimum of 30 grams of gold under this scheme. There is no upper limit for the amount of gold that can be deposited. 
  • Gold can be deposited in all forms such as coins, bars or jewellery.
  • There are 331 collection centers where gold can be tested and deposited.
  • Gold schemes are available for a short period (1- 3 years), medium (5 – 7 years) and long term (12 – 15 years). Different tenures can be availed at different interest rates.
  • You have the option of breaking the lock-in period, however you will be required to pay a penalty in that case.
  • The interest rate depends on the value of the gold deposited and is payable in rupees.
  • Interest rates for short term gold deposits are decided by banks, while interest on medium and long-term gold deposits is set by the Government.
  • Redemption on short-term deposits can be made in cash or gold, however redemption on long and medium term deposits is done only in cash.
  • Another beneficial feature of a gold scheme is that the interest paid towards the deposit is tax exempted.
  • The bank is free to use the deposited gold in any way it sees fit, such as RBI Gold reserves, auctioning, etc.
  • Gold that has been deposited for a short period can be loaned to jewellers.
  • Jewellers can also open a Gold Metal Loan Account, where gold is denominated in grams.

Key Takeaway

A gold saving scheme might have the above-mentioned benefits, but when compared to the benefits of investing in digital gold in an auto-invest plan it is less fruitful. Read more about how to multiply your wealth by investing in OroPocket Auto-investment Plan: Making Investments Easy.