Gold has a long history and is deeply rooted in India’s culture and heritage. It has been considered as a symbol of wealth and good fortune for thousands of years. Like genes and genetics, gold is passed down from generation to generation. In fact one of the most common traditions in Indian weddings is to buy gold for the bride-to-be. A report conducted by the World Gold Council revealed that India is the world’s largest holder of gold, accumulating close to 25000 – 27000 tonnes in Indian households alone. Indians are said to hold around 9-11% of the world’s gold with the Indian middle-class accounting for 56% of our annual gold purchases.
Since gold is highly regarded in traditional Indian families it is the last go-to tool during a financial crunch. This is usually the last resort once all other options have been tried. If you come to think of it. We sell our ancestral home and move to a new home. We sell our old cars and buy new ones. So why not the same with one’s gold?
Today, people’s beliefs are slowly changing and they are finally starting to look at their gold holdings just like any other asset class that they may own. Although the change is slow it is gradually visible among the younger generations.
Gold as an investment
Did you know, it takes 30 years and more for one’s jewellery to accumulate any significant increase in value?
As per a recent survey carried out, more than 75% of Indian households own gold in some form or the other. The same survey also suggests that most Indians don’t prioritize savings and smart investment when purchasing jewellery. Buying gold is an emotional investment made during a festival or a good occasion. It is a traditional/cultural choice that they make hoping that gold will go up in value and will be helpful in the future. However, lack of knowledge and insufficient due diligence can lead to customers paying more than they should for their favorite gold ornament purely from an investment perspective.
Jewellery – Breaking the Taboo
For a long time, pledging family gold in the form of a loan or selling ancestral gold jewellery was considered a taboo. However, over the last few decades due to increased education by gold companies, people have slowly started to let go of their inhibitions and embrace various methods to gain liquidity for their gold. Traditionally most customers choose to explore pledging as an option because customers feel that they will be able to repay the loan and get the ornaments back someday. Although this is the most common option gold loans do come with their own set of inhibitions:
- Customers typically get a loan for 75% (loan-to-value ratio) of the gold’s value from gold loan companies/ financial institutions. Hence even though the gold may be worth Rs 1000 the customer will get approximately Rs 750 in hand to meet their expenses.
- Banks tend to offer even lower LTVs for gold typically upto 65% of the gold value. This means the customer gets very less in hand compared to the actual value of the underlying asset.
- Gold loans tend to have high-interest rates and several additional loaded costs. Plus constant pressure to pay interest may burden the customer who is already in a financial crunch.
Selling gold is the smarter way to go
In today’s day and age, a good way for a customer to decide if their gold ornaments are worth holding on to or not is by visiting an organised gold buyer and getting their gold valued. This should give the customer a much better understanding about what their gold is worth today and whether selling it would help them meet their financial goals/ commitments.
Additionally, there are multiple benefits of selling old gold jewellery to an organised gold buyer :
- One gets a detailed valuation report of their ornaments including a detailed break up of the composition of the ornaments and it’s worth today
- Access to instant liquidity to meet their immediate financial needs
- No pressure for monthly interest payments
- Unblocks the full value of their gold. Selling gold allows customers to get almost 97% of their gold worth
- Finally selling gold allows one to sell old unused jewellery which they probably wouldn’t use and buy new jewellery to keep up with the latest designs and trends. By selling old gold and buying new gold jewellery it drastically reduces out-of-pocket expenses
Although selling ancestral gold is a very personal choice, gold is a significant metal that can help change your life for the better. So if you need the money sometimes it’s just better to let go!
Views expressed above are the author’s own.
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