Investing In Gold Jewellery May Take 5-7 Years To Break Even — CA Shares 'The Truth' About Gold Investing

Buying gold jewellery remains a preferred choice among Indian investors due to secure returns and price surge over the years. However, it may not be a financially rewarding step to invest in gold. In a recent post on X, Nitin Kaushik, a chartered accountant, has shared the drawbacks of seeing gold jewellery as an investment.

He said it could take years for buyers to break even. Kaushik also highlighted the difference between gold acquired for ornamentation and gold bought just for wealth building.

"We all grew up hearing: 'Buy gold'. But most of us end up buying jewellery, not pure gold," Kaushik wrote. He said that 24K gold, which is 99.9% pure, qualifies as "investment grade." In contrast, 22K gold contains 91.6% gold, 18K contains 75%, and 14K only 58.5%.

"A 22K ornament worth Rs 50,000 actually has only ~Rs 45,800 of gold," he added.

Kaushik mentioned that several hidden costs eat into the value of gold jewellery. He said that making charges can range from 10% to 25%, even higher for designer pieces. On top of that, buyers pay 3% GST. Apart from that, jewellers usually buy back ornaments at a rate lower than the market price. As such, he said, "You may need 5–7 years just to 'break even' on jewellery."

Kaushik presented historical data on pure gold's long-term performance. He said, in 2004, 10 grams of 24K gold cost about Rs 6,307. It increased 12.4 times over 20 years to reach about Rs 78,245 by 2024. "That's 13–14% CAGR. Enough to double your money every 5.5 years," he wrote.

Kaushik provided more perspective for the domestic and international significance of gold. According to him, India is the second-largest consumer of gold in the world, with over 25,000 tonnes in household possession, or almost 40% of the country's GDP. By acquiring over 1,000 tonnes of the yellow metal in 2023, central banks around the world also fortified their gold reserves. He noted that the 2,16,000 tonnes of gold that have been extracted so far are limited and that fresh mining only contributes 1.5–2% a year.

Kaushik recommended 24K bars or coins with the BIS hallmark, gold ETFs, gold SIPs and sovereign gold bonds, as alternatives to jewellery for those wishing to invest in gold. "Jewellery = for emotions. ETFs/SGBs = for wealth," he wrote.

Concluding his post, he said, "Don’t confuse gold love with gold investing. Both have value, but only one compounds your wealth."

According to the India Bullion Association, 24K gold prices increased from Rs 1,08,140 per 10 grams on Sep. 8 to a record Rs 1,08,900 on Sep. 9. While in Delhi the price for 10 grams of 24K gold stood at Rs 1,08,520, in Mumbai it reached Rs 1,08,700 per 10 gm.