Buying precious metals such as gold or silver from the trusted banks will give you confidence and satisfaction about the purity when compared to the nearby jewellery shop but at the cost of high prices. Those who are wish to buy gold or silver as an investment can buy from the National Spot Exchange (NSEL) much lower cost when compared to the prices charged by the Banks, NSEL prices are directly linked to the market prices. Most of the people in India, whether they are above or below the property line have a passion to invest in precious metals, especially gold and silver. NSEL offers a chance to retail investors to enter into the precious metal commodities market through its E-series product and can invest in the demat format. Rather than investing in physical gold, one can hold gold or silver in demat account, as it not only saves locker and insurance costs but can be bought in very small quantities. Retail investors can invest in small denominations, like 1 Gram, 2 Grams, 5 Grams and so on, whenever they have sufficient money available for investment.
But there is a difference in the form of delivery of the precious metals. When you buy from a Bank or local Jeweler immediately you will get the physical possession of the metal but when you buy from NSEL you will not get any physical possession instead it will be in the demat or e-form. The advantage is that, you need not worry about the physical keeping or safety of the metals. In case you wish to convert the e-form to physical, that option also available. Another advantage of buying gold/silver from the NSEL is that, even you can buy small quantities.
Banks in India have started taking exorbitant profit by selling gold and silver to the innocent customers. The Relationship Managers of the banks convince the poor customers that buying gold and silver from them is the best and wise decision. In my opinion, if you wanted to buy gold or silver don’t go to the banks, buy it from the local Trusted Jewelers or other gold/silver dealers. The price difference between banks and local jewelry dealers/National Spot Exchange is huge. Banks are looting the customers and innocent customers are buying without knowing the actual fact. So, while buying gold and silver, please avoid banks, instead opt for a credible jeweler, as even in the case of jewellers, we found a lot of price variation with branded stores charging a premium. Do your homework well before you buy gold. And, of course always buy standard, hallmarked gold. If you do decide to go to a jeweler to buy gold in bulk, do negotiate. It is likely you will get a discount.
Advantages of e-gold and e-silver
Investing in e-gold and e-silver are seen as safer options today since they are not affected by inflation and other economic risks. Since gold is an excellent hedge against inflation, it is always best to buy gold as a short or long term investment.
E-gold and e-silver investment gives better returns as compared to ETF’s since the Mutual Funds charge additional costs like fund management fees, vault charges which are comparatively lower here. National Spot Exchange charges 0.4 % annually while it is upto 2.5 % for ETFs. Transparent pricing, seamless trading, no holding cost are some of the advantages of e-gold and e-silver trading. Hassle free buying and selling of commodity is possible in demat gold and silver. It is emerging as a better alternative to ETF, which is like any other mutual fund.
The buyer is not the outright holder of the gold as the institution holds the metal on his behalf. With e- gold, security is always an issue as there is always a risk of account being hacked. Due to security breach losses can occur, which are irreversible but perhaps you are protected by insurance against this issue. Also there are custody charges that one has to pay on a monthly basis. This is just another way to buy our favorite commodity in which our Indians are more attached to than ever, the gold as well as silver. I would personally suggest you to go for this to buy e-silver if you already have an gold ETF account. But if you are looking to have physical gold at the end of the investment period or when needed, go for e-gold offered by them.
Based on my so many years interactions with hundreds of individuals, I felt the instances of mis-selling of investment-related services and products are growing at an alarming rate and the prime source of mis-selling are private banks. Customers don't know any better, as they trust the bankers blindly.
Banks are making huge profits by mis-selling financial and other products to their own innocent customers.