10 Disadvantages of Investing in Gold

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The European debt crisis has increased the buzz surrounding gold, but do you know the disadvantages of investing in gold? While gold prices do have the potential to increase as discussed in our previous blogs, you should be aware of the additional costs and risks involved when investing in gold. If there is something positive about it that makes people want to purchase gold in droves, then there are going to be some negatives that make you think twice, too. These things are real concerns, though most people agree that the advantages outweigh the negatives and they purchase gold anyway. These disadvantages are listed below. 1. High making charges : You have to pay very high making charges, especially if you go for exotic designs. The making charges vary according to design, but on an average, it will be around Rs 200 per gram. Considering the prevailing price of 22 carat gold that is used in jewellery, this works out to be a 10% mark-up. Note that investors will never be able to recover these costs if they decide to sell the jewellery. 2. Impurity : The purity of gold is another problem that one encounters in case of jewellery. Most of the time, it may not be of the level that is being claimed. Though this problem has receded due to the widespread use of ‘hallmarking’, it has not been resolved completely. Since the hallmarking services test only a fraction of the gold jewellery submitted for testing, there are concerns with the hallmarked jewellery as well. 3. Less resale value : Most jewellers are ready to exchange the gold sold by them at market rate and very few are willing to pay in cash. Most of them deduct 5-10% of the value if you want hard cash. The deduction is higher if you try to sell gold that has been bought from some other jeweller. This is because he will question the gold’s purity, claiming it to be supect, and pay you less. 4. No

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