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Investing in Gold for South Asians, feature for Indians and NRIs >> Jewellers >> Investing in Gold

On this page, we present an article on Investing in Gold specifically tailored for Non Resident Indians (NRIs) and South Asians living in North America. For a comprehensive listing of Asian Jewellers check our online section.

"Indian jewellery is usually 24 carat gold and is not meant to be worn, except on very special occasions. On her wedding day a typical middle class bride wears nearly 32 ounces of gold. Family wealth is passed along maternal lines in the form of golden dowries. Wedding guests also give gold coins as lucky wedding gifts. Gold is deeply embedded in the Indian culture." - Editorial 

Gold, for Indians and South Asians has been a traditional safe-harbor and a very emotional investment. Families have long invested in gold and jewellery to bank on at times of need. Gold is also a symbol of family status and wealth in South Asian communities. Gold and jewellery are an integral part of Indian and South Asian wedding just as pomp and grandeur of the ceremony is. This is perhaps the reason why families also begin buying gold jewellery right after birth of a daughter. Such investments in Gold jewellery for the daughter are akin to opening a college or educational fund or investment done by those in the West when a child is born.

The mindset of Non Resident Indians (NRIs) and Global South Asian Diaspora is no different when it comes to their view on gold and jewellery. However, what is different for NRIs is that gold did not figure as a big part of their investment strategy and the little investment in gold and jewellery is geared more towards the tradition than being an investment vehicle.

At the beginning of 2008, writeup and articles in business media, papers and magazines are positioning gold as a sound investment vehicle, with analysts predicting Gold moving to $1000, $1500 or even $2000 an ounce. Even if one were to discard the hype, gold is an investment hedge that should figure in a balanced investment portfolio. The natural question that comes to mind is how do I invest in gold? Is it prudent to buy 22/24 K jewellery as an investment? Are there any other vehicles available to an average investor interested in precious metals?

Buying Gold Jewellery for investment

South Asians and Indians, especially those from a middle class, have seen their parents buy gold jewellery : chains, pendant, earrings, gold bangles and the like that their mother or sisters would wear daily. And some jewellery of more intricate designs reserved for special occasions like weddings, family get-together or other functions. Indian men are also known to invest in jewellery for themselves: chain and gold rings are common though earrings are not very uncommon too.

Buying gold jewellery has traditionally serviced two purposes: act as an investment and an ornament to showcase. The 'physical' nature of such an investment also means that it is very emotional. Many bollywood movies and stories have eulogized down-in-luck families pawning or selling their family heirlooms and jewellery at times of distress. This mindset of Indians has lead to an entire industry of making, retailing, recycling, remaking jewellery. As per one estimate, Indians account for about xxxx percent of Gold demand, primarily from Indian consumers. In the past few years, the gold retailing geared towards Indians has also got modernized, thanks in part to chains like Tata's Tanishq that has brought transparency to the industry. Sensing an opportunity, Banks like ICICI also begun to sell gold coins to customers.

Tips on buying Indian Jewelery in North America

Given, the voracious Indian demand for jewellery, it is not surprising that there are over 250 Indian jewellers in the US and Canada. Several online dealers have also specialized in catering to demand from the ethnic community. [refer to for the most comprehensive listing of Indian Jewelers in USA and Canada] I have visited Indian Jewellers in the US and Canada on several occasions to buy jewellery for self, relatives and friends and here are a few observations.

Why buy from Indian jewelers?

High grade of Indian jewellery. Most western style jewellery is of lesser 'purity;' anywhere between 8 to 18K (Carat) is common for jewellery sold by American jewelers. Most ethnic jewellers (Indian, Pakistani) carry 22 or even 24 K gold jewellery. Higher grade jewelry is naturally a better investment, especially if one is thinking of recycling or reusing at some point in the futures

Caveats on Indian Jewellery in North America

  • The making charge is a large percentage of the cost of an ornament. Indians and south Asian jewelers charge anywhere from $6 - $20 per gram as 'labor charge' for jewellery. The reasoning is that it is hand crafted and made in India, Pakistan, Singapore or elsewhere and then shipped to US, UK or Canada hence the mark-up. Shopping around helps. I have observed that this charge is highly negotiable and depends on the intricacy of designing among other things. Needless to say if one is looking to Gold as an investment, the markup of $10 (or whatever) will negate any gains. Even if one gets the jewellery back to the same jeweller after say a month, the jeweler will only pay for the prevailing cost of metal and may not reimburse the making/labor charge. Therefore, if you are looking at gold jewellery as a short-term, it may not be prudent. If you are looking at a dual-purpose intent, sure, why not?
  • Gold jewellery may be taxable. Depending on the state or province you live in, gold jewellery may be taxable, adding to the cost of your investment. Some south Asian jewelers try and bypass this by asking their customers if they would like to go without a bill/receipt, sometimes offering a 'cash' discount if paid in cash (leaving no paper trial). Needless to say, this is not a good option for an individual investor.

Buying Gold coins for investment

Many kinds of Gold coins are minted by official government mints around the world. Most popular investment grade coins include the South African (Krugerrand), Canadian Maple Laf, American Eagle, Mexican Peso, Australian Gold Nugget. Other gold bullion coins include Austrian Philharmonic, British Britannia, Chinese Panda, Gold Dinar, Russian Chervonets, Swiss Vreneli. These coins are available from many banks and coin dealers around the world. In the US, coins are sold by several banks (at select branches) and from coin dealers. In Canada, only the Royal Bank (Scotia Bank) is authorized to sell the 'Canadian Maple' to retail customers. Of course, you can order coins from the Canadian Mint but those are generally 'collector issue' coins (meaning more expensive than the pure gold value).

Buying gold coins for investment in Canada

Royal Canadian Mint issues gold and bullion for investment in Canada. Scotiabank in Canda is an official distributor of Canadian Maple Leaf gold and silver coins. The process of ordering coins is a bit cumbersome as one has to do it via a branch in person. [The website just says: Coins can be ordered through any Canadian branch of Scotiabank] Following are the steps the author followed in buying a Canadian maple in Canada:

  • Get a price quote for a coin from the teller/manager. You need to be specific about the coin, the number you want etc. [You will have to ask for specific quote for say "Canadian Maple Leaf, one ounce gold coin". For other kinds of investment coins check the following). Note: It is not every day that a customer walks into a branch and asks to buy gold coins. Therefore, not all tellers at the banks are familiar with the process, so you may have to guide them or they will get a manager to help.
  • The teller/manager will get the quote from their internal system (or head-office). This is because the rate (obviously) changes from day to day.
  • The rate quoted will be in US Dollars (even in Canada, Gold is traded in USD). The branch will add their small fee and possibly a shipping fee to have the coin/s couriered from the main office to their branch for you to collect.
  • You will have to place an order at the rate quoted and pay the amount in US dollars. If you don't have US Dollars, the teller will convert your Canadian funds to USD (again a small fee may apply)
  • The coin/s will be couriered to your local branch where you placed the order and you may collect it

Note on Tax on Gold Coins in Canada

Goods and Services Tax (GST) of 5% will payable on all gold coins of less than 99.5% purity, including the pre-1933 European and U.S. gold coins. Gold coins, bars, ingots or wafers refined to a purity level of 99.5% or greater (including the Maple Leaf, Austrian Philharmonic and Australian Nugget gold coins) are exempted from GST.

Provincial Sales Tax (PST) will be payable on gold coins of less than 99.5% purity. Gold coins refined to a purity level of 99.5% or greater are exempted from PST in the following provinces: Alberta, British Columbia, Quebec, Northwest Territory and Yukon.

Note: From a pure investment standpoint if you are considering buying gold jewellery or gold coins, one would also have to factor the cost of ensuring it and storing to protect the investment.

Gold Stocks, Bonds and other investments

For those who don't want to invest directly in coins or jewelery, several indirect investment options, including gold stocks, bonds and exchange traded funds exist. As per Business Week, The S&P 1500 Gold index has seen a jump in its trailing 52-week relative performance ranking, possibly the result of rising inflationary concerns and a weakening U.S. dollar as a result of the Fed's recent double-barrelled cut in interest rates.

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