The Purity Proposition
The first major difference lies in purity. Gold coins are primarily investment products, typically available in 24 Karat (24K) purity, which is 99.9% pure gold. This makes their valuation straightforward. Jewellery, on the other hand, is usually made
from 22K (91.6% pure) or 18K (75% pure) gold. This is because pure 24K gold is too soft for crafting durable ornaments that can withstand daily wear. The added alloys like copper or nickel provide the necessary strength but also mean you are getting less gold per gram compared to a 24K coin.
Understanding Making Charges
This is where the costs begin to diverge significantly. 'Making charges' are the fees for craftsmanship—the labour involved in turning raw gold into a finished product. For jewellery, these charges can range from 8% for machine-made items to over 25% for intricate, handcrafted designs. These costs are a significant part of your initial outlay. Gold coins, being machine-minted and designed for investment, have much lower making charges or premiums, often between 1% and 5%. From a pure cost perspective, you get more gold for your money with a coin.
The Reality of Resale Value
The most crucial factor for any investor is the return. When you sell gold, the making charges you paid are almost never recovered. This immediately puts jewellery at a disadvantage. A jeweller will typically value the piece based on the net weight and purity of the gold at the prevailing market rate, often after deducting 'wastage' or melting losses, which can be anywhere from 10-15%. Gold coins, especially those from reputable mints with assay certification, retain a much higher percentage of their value. Their resale is based almost entirely on the gold's weight and purity, making them a more efficient vehicle for preserving wealth.
Liquidity and Ease of Sale
Liquidity refers to how quickly you can convert an asset into cash. Both forms of gold are relatively liquid, but with some caveats. Gold coins are standardized, making them easy to sell to most jewellers or bullion dealers. However, a key point to remember is that banks in India can sell gold coins but are not permitted to buy them back. Jewellery can also be sold, but the process can be more complex. Its value needs to be assessed for purity and deductions, and some jewellers may only offer favourable buy-back terms for pieces originally purchased from their own store.
Taxation at a Glance
When purchasing either gold coins or jewellery in India, a Goods and Services Tax (GST) of 3% is levied on the value of the gold. However, for jewellery, an additional 5% GST is also applied to the making charges. Since making charges are significantly higher for jewellery, the overall tax outgo is also higher compared to buying a gold coin of the same value. This further widens the gap in the initial investment cost.
