InvestorQ : What are gold savings scheme?
Sakshi Malhotra made post

What are gold savings scheme?

Nishita Gala answered.
3 years ago

Indians love for gold knows no bounds. Its no wonder then that India is one of the largest consumers of the yellow metal in the world. However, many Indians are now taking to purchasing gold via the gold savings scheme offered by many jewellers vis-à-vis owing jewellery, gold coins, bars, etc.

The reason is that gold savings scheme are handy wherein you can buy jewellery or gold ornaments in advance and payback in a staggered manner.

These gold saving schemes allow individuals to plan for various life events and acts like a recurring deposit.

A typical gold scheme allows you to deposit a fixed amount every month for the chosen tenure. When the term ends, you can buy gold (from the same jeweller) at a value that is equivalent to the total money deposited, including a bonus amount. This conversion is done at the gold price prevailing on maturity. In most cases, the jeweller adds a month's instalment at the end of the tenure as a cash incentive or may even offer a gift item.

Economic Times explains this with the following example: Say, if one invests a fixed amount every month for 11 months. The 12th instalment, which is equal to your monthly contribution, is paid by the retailer. So, if you invest Rs 5,000 a month in the scheme, after 11 months you would have invested Rs 55,000 and the retailer will put in an additional Rs 5,000 as the last instalment. So, you will be able to buy jewellery worth Rs 60,000 by paying only Rs 55,000. Nowadays, jewellers either give discount of up to 90 percent of the last instalment or that amount to the value of the gold on maturity.